13. Special order decision: Qualitative factors

13 Special order decision: Qualitative factors LO1 Max Gupta Corporation has a maximum production capacity of 50 000 units, and exhibits the following cost structure for the upcoming year: $2 000 000 Sales (40 000 units @ $50) Manufacturing costs: Variable $20 per unit $360 000 Fixed Marketing and administrative costs: Variable Fixed $10 per unit $40000 REQUIRED a What is the expected level of profit based on the above information? b Should the company accept a special order for 2000 units at a selling price of $40 if variable marketing expenses associated with the special order are $4 per unit? What will be the incremental profit if the order is accepted? Suppose that the company received a special order for 6000 units at a selling price of $38, with no variable marketing expenses. What would be the impact on profit? d Assume that if the special order were accepted, all the regular customers would be aware of the price paid for the special order. Would that influence your decision? Why