3 Fairmount Travel Gear produces backpacks and sells them to vendors who sell them under their own label. The cost of one of its backpacks follows. $18.20 12.20 5.20 Materials Labor Variable overhead Fixed overhead ($2,802,400 per year; 452,000 units per year) Total 6.20 $41.80 Riverside Discount Mart, a chain of low-price stores, has asked Fairmount to supply it with 21,000 backpacks for a special promotion Riverside is planning. Riverside has offered to pay Fairmount a unit price of $44 per pack. The regular selling price is $62. The special order would require some modification to the basic model. These modifications would add $4.20 per unit in material cost, $1.70 per unit in labor cost, and $0.70 in variable overhead cost. Although Fairmount has the capacity to produce the 21,000 units without affecting its regular production of 452,000 units, a one-time rental of special testing equipment to meet Riverside's requirements would be needed. The equipment rental would be $55,800 and would allow Fairmount to test up to 52,000 units. Required: a. Prepare a schedule to show the impact of filling the Riverside order on Fairmont's profits for the year. b. Do you agree with the decision to accept the special order? c. Considering only profit, determine the minimum quantity of backpacks in the special order that would make it profitable. All Cost in Thousands of Dollars Alternative 452,000 units 473,000 units Difference Sales Revenue Less variable cost Materials 8226.4 10595.2 Labor Variable Overhead 2790.7 Total Variable Cost 19960.6 Contribution Margin Less: Fixed Cost Operating Profit (loss) Status Quo 28024 28948 924 -2368.8 6574.7 1060.3 5514.4 2350.4 440.3 16091.2 0 The Minimum quantity of backpacks units