Alexon SL is an electronics business with eight product lines. Profit data for one of the products (XT-107) for the month just ended (June 2016) are as follows: Sales, 200 000 units at average price of 100 20 000 000 Variable costs Direct materials at 35 per unit 7 000 000 Direct manufacturing labour at 10 per unit 2 000 000 Variable manufacturing overhead at 5 per unit 1 000 000 Sales commissions at 15% of sales 3 000 000 Other variable costs at 5 per unit 1 000 000 Total variable costs 14 000 000 Contribution margin 6 000 000 Fixed costs 5 000 000 Operating profit 1 000 000 Xucl Mecniques Fluvi SA, an instruments company, has a problem with its preferred supplier of XT-107 component products. This supplier has had a three-week strike and will not be able to supply Xucl 3000 units next month. Xucl approaches the sales representative of Alexon SL, Angela Zamora, about providing 3000 units of XT-107 at a price of 80 per unit. Zamora informs the XT-107 product manager, Francisco Garca-Salve, that she would accept a flat com- mission of 6000 rather than the usual 15% if this special order were accepted. Alexon has the capacity to produce 300 000 units of XT-107 each month, but demand has not exceeded 200 000 units in any month in the last year. Required 1 If the 3000-unit order from Xucl is accepted, what will be the effect on monthly operating profit? (Assume the same cost structure as occurred in June 2016.) 2 Francisco ponders whether to accept the 3000-unit special order. He is afraid of the precedent that might be set by cutting the price. He says, 'The price is below our full cost of 95 per unit. I think we should quote a full price, or Xucl will expect favoured treatment again and again if we continue to do business with them.' Do you agree with Francisco? Explain