Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of $103,200$ units per year is:

$1$

points

points

${}_{\text{e}\text{B}\text{o}\text{o}\text{k}}$

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References

Direct materials

Direct labor

Variable manufacturing overhead

Fixed manufacturing overhead

Variable selling and administrative expenses

Fixed selling and administrative expenses

$$1\mathrm{.}60$

$$3\mathrm{.}00$

$$0\mathrm{.}70$

$$3\mathrm{.}85$

$$1\mathrm{.}70$

$$2\mathrm{.}00$

The normal selling price is $$25\mathrm{.}00$ per unit. The company's capacity is $128,400$ units per year. An order has been received from a mailorder house for $2,100$ units at a special price of $$22\mathrm{.}00$ per unit. This order would not affect regular sales or total fixed costs.

Required:

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

As a separate matter from the special order, assume the company's inventory includes $1,000$ units that are inferior quality. The units must be sold through regular channels at a reduced price. The company does not expect the selling of these inferior units to affect regular sales. What unit cost is relevant for establishing a minimum selling price for the inferior units?

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Required $1$

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