3 Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 60,000 units per year is: Cost Elements Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expense Fixed selling and administrative expense Amount ($) 5.60 4.80 1.50 5.20 1.50 2.40 The normal selling price is $22 per unit. The company's capacity is 75,000 units per year. An order has been received from a mail-order house for 15,000 units at a special price of $15.00 per unit. This order would not affect regular sales. Required a) If the order is accepted, by how much will annual profits be increased or decreased? (The order will not change the company's total fixed costs.) b) In pricing special order, pricing is done based on variable costs which reduces the price significantly as compared with the price offered to regular customer. As a management accountant, what types of problem you may face in offering reduced price to special customer? What may be your preventive measures against such problem? [Marks: 4+2=6]