Sato Awards has had a request for a special order of 10 silver-plated trophies from the provincial tennis association. The normal selling price of such a trophy is $249.95 and its unit product cost is $164.00, as shown below:
Most of the manufacturing overhead is fixed and unaffected by variations in how many trophies are produced in any given period. However, $7 of the overhead is variable, depending on the number of trophies produced. The customer would like a special logo applied to the trophies requiring additional materials costing $6 per trophy and would also require acquisition of a special tool costing $195 that would have no other use once the special order was completed. This order would have no effect on the company's regular sales, and the order could be filled using the company's existing capacity without affecting any other order.

Required:
What effect would accepting this order have on the company's operating income if a special price of $199.95 is offered per trophy for this order? Should the special order be accepted at this price?

Transcribed Image Text:

Direct materials Direct labour... Manufacturing overhead Unit product cost ….. $ 93.00 56.00 15.00 $164.00