1. Buckeye Hunting Equipment, a maker of outdoor sporting equipment, has received a special order for a set of custom tree stands that it normally does not manufacture. The company has excess capacity, and the order could be manufactured without reducing production of the firms regular products. Discuss the relevance of each of the following facts below in computing the cost of the special order.

a. Buckeye owns the equipment to be used in producing the order. The equipment has a book value of $2,000 and has no other use for Buckeye Hunting.

b. If the special order is accepted, the operation will require some of the storage space in the companys manufacturing facility. If the space is used for that purpose, the company will have to rent storage space (on a temporary basis) in a nearby warehouse at a cost of $18,000. The building depreciation allocated to the storage space to be used in producing the special order is $12,000.

c. If the special order is accepted, it will require a subassembly. Buckeye Hunting can purchase the subassembly for $24.00 per unit from an outside supplier or make it for $30.00 per unit. The $30.00 cost per unit is determined as follows:

Direct Material.. $10.00

Direct Labor.................. 6.00

Variable Overhead 6.00

Allocated Fixed Overhead.. 8.00

Total unit cost of Subassembly $30.00

Should Buckeye make, or buy, this subassembly? Explain your reasoning.