Alexon SL is an electronics business with eight product lines. Profit data for one of the products

(XT-107) for the month just ended (June 2022) are as follows:

Xuclà Mecàniques Fluvià SA, an instruments company, has a problem with its preferred supplier of XT-107 component products. This supplier has had a three-week strike and will not be able to supply Xuclà 3000 units next month. Xuclà approaches the sales representative of Alexon SL, Angela Zamora, about providing 3000 units of XT-107 at a price of €80 per unit. Zamora informs the XT-107 product manager, Francisco García-Salve, that she would accept a flat commission of €6000 rather than the usual 15% if this special order were accepted. Alexon has the capacity to produce 300 000 units of XT-107 each month, but demand has not exceeded 200 000 units in any month in the last year.
Required 1 If the 3000-unit order from Xuclà is accepted, what will be the effect on monthly operating profit? (Assume the same cost structure as occurred in June 2022.)
2 Francisco ponders whether to accept the 3000-unit special order. He is afraid of the precedent that might be set by cutting the price. He says, ‘The price is below our full cost of €95 per unit.
I think we should quote a full price, or Xuclà will expect favoured treatment again and again if we continue to do business with them.’ Do you agree with Francisco? Explain.

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Sales, 200 000 units at average price of 100 Variable costs Direct materials at 35 per unit Direct manufacturing labour at 10 per unit Variable manufacturing overhead at 5 per unit Sales commissions at 15% of sales Other variable costs at 5 per unit Total variable costs Contribution margin Fixed costs Operating profit 7 000 000 2 000 000 1 000 000 3 000 000 1 000 000 20 000 000 14 000 000 6 000 000 5 000 000 1 000 000