1.- El Guapos manufactures a frozen burrito called El Grande. Variable manufacturing costs per unit of El Grande are as follows:

Direct materials	$1
Direct labor	$10
Variable manufacturing overhead	$5

Don Pablos has offered to sell El Guapo 5,000 units of El Grande for $22 per unit. If El Guapo accepts the offer, $70,000 of fixed manufacturing overhead will be eliminated.

Using your differential analysis skills, prepare an analysis to explain the alternative scenarios, which will make it easier for El Guapo to make a decision. What should El Guapo do? What is your recommendation to El Guapos?

2.- Pablitos manufactures a single product with the following full unit costs for 6,000 units:

Direct materials	$160
Direct labor	80
Manufacturing overhead (40% variable)	240
Selling expenses (60% variable)	80
Administrative expenses (10% variable)	40
Total per unit	$600

A company recently approached Pablito with a special order to purchase 1,000 units for $575. Pablito currently sells the models to dealers for $1,100. Capacity is sufficient to produce the extra 1,000 units. Since Pablito was approached by the buyer, no selling expenses would be incurred on the special order.

Required:

1. Ignoring the special order, determine Pablitos profit on production and sales of 6,000 units. Ignore taxes in these analyses.

2. Should Pablito accept the special order if its goal is to maximize short-run profits? Determine the impact on profit of accepting the order.

3. When making a special-order decision, what non-quantitative aspects of the decision should Pablito consider?