At the end of August, Northern Manufacturing received a special order from USD International, a company that makes leather products. This special order offers to buy 500 ft2 of leather for $10.00 per square feet in September. The leather processing capacity of Northern Manufacturing is 2,000 ft2 per month. The selling costs for the special order order will be similar to that of regular orders.

Upon review of Septembers production data of Northern Manufacturing, you have compiled the following information (excluding special order):

• Selling price per unit = $14.50

• Direct materials cost per unit = $1.36

• Labor cost per unit = $2.36

• Variable manufacturing overheads per unit = $3.00

• Variable selling overheads per unit = $2.31

• Fixed manufacturing overheads = $ 4,000

• Fixed selling overheads = $ 2,750

• Units produced and sold = 1,500 ft2

PART A (15 points): Use the information provided above to conduct a differential analysis for September and decide whether Northern Manufacturing should accept the special order from USD International or not.

		Regular orders	Special order
Selling price per unit		$14.50	$10.00
Direct materials cost per unit		$1.36
Labor cost per unit		$2.36
Variable manufacturing overheads per unit		$3.00
Variable selling overheads per unit		$2.31
Fixed manufacturing overheads		$ 4,000
Fixed selling overheads		$ 2,750
Units produced and sold		1,500 ft^2	2,000 ft^2
Northern Manufacturing
Differential Analysis
August 31, 20X1
		Status Quo:	Alternative:
		Reject Special Order	Accept Special Order	Difference
Sales revenue				$ -
Less Variable costs
	Direct materials costs			$ -
	Labor costs			$ -
	Variable manufacturing overheadss			$ -
	Variable selling overheadss			$ -
Total contribution				$ -
Less Fixed costs
	Fixed manufacturing overheads			$ -
	Fixed selling overheads			$ -
Operating profit (before taxes)				$ -