ABC Corp manufactures coffee makers that they usually sell to customers for $75/each and are currently operating at 80% capacity. The cost to produce 10,000 coffee makers per year are as follows: Direct Materials $250,000 Direct Labour $200,000 Variable Overhead $120,000 Fixed Costs $195,000 A customer has approached the company and offered to buy a special order of 2,000 coffee makers for $60 each. Accepting the offer would not effect the company's normal sales and the company would not need to increase capacity. Required (8 marks) A) Perform an incremental analysis. Should Management accept the offer and why or why not? B) In a separate scenario, the company would have to expand the size of their operation to accept the special order and this would increase fixed costs by $10,000 per year. Show how this would change the incremental analysis above and state whether this would change the decision.

ABC Corp manufactures coffee makers that they usually sell to customers for $75/each and are currently operating at 80% capacity. The cost to produce 10,000 coffee makers per year are as follows: Direct Materials $250,000 Direct Labour $200,000 Variable Overhead $120,000 Fixed Costs $195,000 A customer has approached the company and offered to buy a special order of 2,000 coffee makers for $60 each. Accepting the offer would not effect the company's normal sales and the company would not need to increase capacity. Required (8 marks) A) Perform an incremental analysis. Should Management accept the offer and why or why not? B) In a separate scenario, the company would have to expand the size of their operation to accept the special order and this would increase fixed costs by $10,000 per year. Show how this would change the incremental analysis above and state whether this would change the decision.