Assume that Jellico Inc. normally sells its products for $12 each. Assume that a customer asks for a special order of 10,000 units at a price of $70,000, or $7 per unit. Jellico has excess capacity.

Given these facts:
A. Find the cost per unit before accepting the special order, considering all costs.
B. Compute the operating profits at the current level of production, with a selling price of $12 each.
C. Find the total costs that Jellico would have if it accepted the special order, and the cost per the new volume of 110,000 units.
D. Find the operating profit if Jellico accepts the special order.
E. Should Jellico accept the special order at a $7 per unit price? Explain.

Transcribed Image Text:

Currently, Jellico is producing 100,000 units. Variable manufacturing costs $640,000 Variable marketing and administrative costs $20,000 $100,000 Fixed manufacturing expenses Fixed marketing and administrative costs $80,000