Adams Pottery Company produces wedding vases. The company currently manufactures 7,500 vases each month and the maximum capacity of the firms manufacturing facilities is 10,000 vases each month. The selling price of a vase is $175. Production costs are presented below:

Adams Pottery has received a special order for 2,500 vases at $100 per vase. The company will not incur any variable marketing costs for this special order. Emily Anderson, a management accountant at Adams Pottery, is responsible for making a recommendation regarding whether the special order should be accepted or not. After analyzing the order, Anderson concluded that the current quote seems high and, thus, the company will need to request competitive bids from raw-material supply vendors. Anderson made this suggestion to Michael Jenkins, who is the controller. However, Jenkins claimed that the prices are not high and asked her not to discuss her suggestion with anyone else. Anderson later found out that Jenkins is an uncle of the owner of the current vendor.

Required:

1.(1 point) Discuss which costs Emily Anderson will need to consider in her analysis of the special order.

2.(1 point) Determine the new average unit cost.

3.(1 point) Determine the incremental unit cost for the special order.

4.(1 point) Discuss whether Adams Pottery should accept the special order or not.

5.(1 point) Discuss what actions Anderson could take in order to resolve the ethical conflict arising out of Jenkins claim that the company avoids competitive bidding.

Production Costs Variable costs: Manufacturing: Direct labor $ 375,000 Direct material 262,500 Marketing 187,500 Total variable costs $ 825,000 Fixed costs: Manufacturing $ 275,000 Marketing 175,000 Total fixed costs $ 450,000 Total costs $1,275,000 Variable cost per unit$ 110 Fixed cost per unit 60 Average unit cost $ 170