Dauphin Ltd has provided you with the following information for the single product it produces:

Per Unit

Direct materials

$12.00

Direct labour

$8.00

Variable overhead

$6.00

Variable selling expenses

$5.00

Fixed overhead

$3.00

The fixed overhead of $3.00 per unit is based on expected production of 20,000 units. If more than 20,000 units were produced, Dauphin would incur an additional $100,000 of fixed overhead costs. Dauphins fixed selling and administrative expenses total $40,000, regardless of the number of units sold. Dauphins income tax rate is 40%.

Dauphin expects to sell 17,000 units at $40 per unit. It has received a special order request for 9,000 units at $35 per unit. On the special order, variable selling expenses would only be $1.00 per unit. All other costs will remain unchanged.

Required:

a) Should Dauphin accept this order? Explain fully

b) What are some qualitative factors that management needs to consider when deciding to accept or reject this order?