Delta Company produces a single product. The cost of producing and selling a single unit of this product at the companys normal activity level of 84,000 units per year is:

Direct materials	$	1.60
Direct labor	$	3.00
Variable manufacturing overhead	$	0.60
Fixed manufacturing overhead	$	3.25
Variable selling and administrative expenses	$	1.40
Fixed selling and administrative expenses	$	2.00

The normal selling price is $18.00 per unit. The companys capacity is 99,600 units per year. An order has been received from a mail-order house for 1,300 units at a special price of $15.00 per unit. This order would not affect regular sales or the companys total fixed costs.

Required:

1. What is the financial advantage (disadvantage) of accepting the special order?

2. As a separate matter from the special order, assume the companys inventory includes 1,000 units of this product that were produced last year and that are inferior to the current model. The units must be sold through regular channels at reduced prices. The company does not expect the selling of these inferior units to have any effect on the sales of its current model. What unit cost is relevant for establishing a minimum selling price for these units?

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What is the financial advantage (disadvantage) of accepting the special order?

As a separate matter from the special order, assume the companys inventory includes 1,000 units of this product that were produced last year and that are inferior to the current model. The units must be sold through regular channels at reduced prices. The company does not expect the selling of these inferior units to have any effect on the sales of its current model. What unit cost is relevant for establishing a minimum selling price for these units? (Round your answer to 2 decimal places.)

Futura Company purchases the 68,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $13.40 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the companys chief engineer is opposed to making the starters because the production cost per unit is $13.50 as shown below:

	Per Unit			Total
Direct materials	$	7.00
Direct labor		2.80
Supervision		1.50		$	102,000
Depreciation		1.30		$	88,400
Variable manufacturing overhead		0.60
Rent		0.30		$	20,400
Total product cost	$	13.50

If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $102,000) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $90,000 per period. Depreciation is due to obsolescence rather than wear and tear.

Required:

What is the financial advantage (disadvantage) of making the 68,000 starters instead of buying them from an outside supplier?