A company is operating at 80% of its maximum capacity of 50,000 units. It makes a single product and is selling all of its regular production, and it anticipates a surge in demand in the next 5 years. The company is considering a proposal to supply 10,000 units to a customer as a special one-time order. The proposed price per unit is $14.50. The regular selling price for this product is $22.50. The per- unit variable costs are as follows:

Variable cost	Per unit
Direct materials	$2.50
Direct labour (1/4 hour)	$6.00
Variable manufacturing overhead	$1.50
Sales commission	$0.50

Annual fixed manufacturing cost is $72,000. There will be no sales commission, or any other administrative costs associated with the special order.

Need help with following questions:

1. Should the company take on the proposed special order for 10,000 units at a selling price of $14.50 per unit?

2. The customer requesting the special order called the next day and asked Rotman to engrave its logo on each unit. This would require an additional 10 minutes of direct labour per unit and the purchase of a special etching tool that would cost $7,500. Rotman would have no use for the tool after the project and it would not have any resale value. What effect would this have on the profitability of the special order?

3. Review the results from parts (a) and (b) and provide a recommendation to management.

• provide management with a revised price that takes into consideration the cost of the additional labour and etching tool and allows Rotman the choice to either break even or ensure the same incremental income as the part (a) proposal
• Discuss a qualitative concern relevant to the revised proposal