Dollar Company

Dollar Company makes carpets. A customer wants to place a special order for 1,000 carpets in navy blue with the company logo woven in the middle, to be priced at $30 each. Normally, the company would charge $60 per carpet for this type of order. The company figures that yarn and backing will cost $12 per carpet, variable overhead (machining, electricity) is $5 per carpet, direct labour is $10 per carpet, and one setup will be required at $800 per setup. The setup charge costs are 100 percent labour. Currently, the workers needed to set up and make the carpets are working at the company. Their wages will be paid whether or not the special order is accepted. The company's policy is to avoid layoffs to the extent possible.

Refer to Dollar Company. What is a cost of the special order in addition to yarn and backing?

	setup costs
	direct labour
	variable overhead
	depreciation on machinery