A customer has requested that X&G Corporation fill a special order for 4,000 units of product Q40 for $40.00 a unit. While the product would be modified slightly for the special order, product Q40's normal unit product cost is $54.40:

Per Unit

Direct materials 5.6

Direct labor 6.4

Variable manufacturing overhead 17.8

Fixed manufacturing overhead 17.6

Unit product cost 47.4

Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like modifications made to product Q40 that would increase the variable costs by $7.00 per unit and that would require an investment of $10,000 in special molds that would have no salvage value.

This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order.

Required:

a.What is the minimum price at which X&G Corporation will accept this order? Show you work.

b. Calculate the effect on X&G Corporation's operating profit should this order be accepted.