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AJ & Company manufactures tennis rackets. Their newest product sells for $350. The company produces and sells about 15,000 units per year. Cost data
AJ & Company manufactures tennis rackets. Their newest product sells for $350. The company produces and sells about 15,000 units per year. Cost data follows: Variable manufacturing $215 per unit Variable selling and administrative Fixed manufacturing Fixed selling and administrative $80 per unit $250,000 per year $52,000 per year A potential deal has come up for a one-time sale of 200 units at a special price of $290 per unit. The sale will not negatively impact the company's regular sales activities. It will require the normal variable manufacturing costs and variable selling and administrative costs. There is plenty of excess capacity and the deal will not impact fixed costs. Create a DIFFERENTIAL ANALYSIS of a Special Pricing Decision showing the expected increase or decrease in operating income if this order is accepted. Based on your analysis, would you accept or reject the order? Why? You can see a sample analysis in Chapter 10, Exhibit M10-5 but note your given information is a little different. This assignment is worth 15 points overall, 9 points for proper setup, 3 points for correct final answer, 3 points for formulas.
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