The following monthly frnancial data are for RadioCom Inc., a maker of handheld VHF radios. RadioCom produces and sells 5,000 radios each month to regular customers. 

RadioCom received an offer from the Coast Guard Auxiliary to purchase 1,000 radios this coming month for \($75\) per unit. RadioCom can only produce up to 5,000 radios a month, so the special order would result in reduced sales to regular customers. Variable costs per radio will remain at \($60.\) This special order will have no effect on monthly fixed costs.

Required

a. Using the differential analysis format presented in Table 7.9, determine whether RadioCom would be better off rejecting (Alternative 1) or accepting (Alternative 2) the offer received from the Coast Guard Auxiliary.

b. Summarize the result of accepting the special order using the format presented in Table 7.10.

Table 7.9

Table 7.10

Transcribed Image Text:

Per Unit Sales revenue $100 Total Monthly Data at 5,000 Radios $500,000 Variable costs 60 300,000 Contribution margin $ 40 $200,000 Fixed costs Profit 135,000 $ 65,000