Acme Corp.

Acme produces a high-quality computer chip. Unit production costs (based on the capacity production of 125,000 units per year) follow:

Direct material $60

Direct labor 32

Overhead (15% variable) 25

Total $101

Other information:

Sales price $119

SG&A costs 10

The Memory Division is presently operating at a level of 110,000 chips per year.

1.How much profit or loss will the Memory Division record if it accepts a special order on 5,000 chips at $98?

2.Should Acme accept the special order?