Total cost data follow for Glendale Manufacturing Company, which has a normal capacity per period of 8,000 units of product that sell for \($60\) each. For the foreseeable future, regular sales volume should continue to equal normal capacity.

1. Beyond normal capacity, fixed overhead costs increase \($1,800\) for each 500 units or fraction thereof until a maximum capacity of 10,000 units is reached.

2. Selling expenses consist of a 6% sales commission and shipping costs of 80 cents per unit. Glendale pays only three-fourths of the regular sales commission on sales totaling 501 to 1,000 units and only two-thirds the regular commission on sales totaling 1,000 units or more. Glendale’s sales manager has received a special order for 1,200 units from a large discount chain at a price of \($36\) each, F.0.B. factory. The controller’s office has furnished the following additional cost data related to the special order:

1.Changes in the product’s design will reduce direct material costs \($1.50\) per unit.

2.Special processing will add 20% to the per-unit direct labor costs.

3.Variable overhead will continue at the same proportion of direct labor costs.

4.Other costs should not be affected.

Required

a. Present an analysis supporting a decision to accept or reject the special order. (Round computations to the nearest cent.)

b. What is the lowest price Glendale could receive and still make a \($3,600\) profit before income taxes on the special order?

c. What general qualitative factors should Glendale consider?

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Direct material Direct labor.. Variable manufacturing overhead. Fixed manufacturing overhead (Note 1). Selling expense (Note 2).. Administrative expense (fixed) $100,800 62,400 46,800 38,400 35,200 15,000 $298,600