Special order. Anticipating unusually high sales for July, Xtreme Bikes Corporation, am ountain bike products company, plans to produce 20.000 bike seats, using all available capacity. Xtreme Bikes anticipates costs for the seats for July as follows:

On June 30.

Xtreme Bikes received a contract offer from Schwinner (a bike manufacturer)

to s upply 10.000 seats for delivery by July 31.

In place of the standard sales price of $15 per seat, the Schwinner offer would reimburse Xtreme Bikes' share of both variable and fixed manufacturing costs (that is. $4.45 per product) plus a fixed fee of $5,000. Variable marketing costs would be zero for this order. None of the fixed costs would be affected by this order. Xtreme Bikes would lose 10,000 products of sales to regular customers in July, but this order would not affect sales in any subsequent months.

Prepare a differential analysis comparing the status quo for July with the alternative case in which Xtreme accepts the special order. Write a brief report to Xtreme Bikes' management explaining why the company should or should not accept the special order.

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Unit Manufacturing Costs Variable Direct Materials Cost $1.20 Variable Labor.. 2.50 Variable Overhead 0.10 Fixed Overhead. 0.65 Total Manufacturing Costs per Unit $ 4.45 Unit Marketing Costs Variable Fixed $0.90 2.00 Total Marketing Costs per Unit Total Unit Costs Selling Price per Unit. 2.90 $ 7.35 $15.00