Special order. Trans Electronics Company has a capacity of 200,000 computer monitors per year. The company is currently producing and selling 160,000 monitors per year at a selling price of $400 per monitor. The cost of producing and selling one monitor at the 160,000-unit level of activity follows:

The company has received a special order for 10,000 monitors at a price of $260 per monitor. Because it need not pay a sales commission on the special order, the variable selling and administrative costs would be only $50 per monitor. The special order would have no effect on total fixed costs. The company has rejected the offer based on the following computations:

Management is reviewing its decision and wants your advice. Should Trans Electronics have accepted the special order? Show your computations.

Transcribed Image Text:

Variable Manufacturing Costs Fixed Manufacturing Costs Vanable Selling and Administrative Costs. Fixed Selling and Administrative Costs Total Costs. $160 40 80 20 $300