During the first quarter of fiscal $2025,$ the food division is projected to be operating at $80\%$ of normal capacity and is considering two special order requests to fill the remaining $20\%$ of capacity.

After reviewing the information provided below, please determine whether either or both special orders should be accepted,

consider both quantitative and qualitative factors in your analysis.

The food division managers would like assistance developing a pricing strategy for the new line of dog treats, the manager is looking at pricing strategy for each stage of the product life cycle $($information on dog food products is found below$).$

Special Order

The selling price and cost information for each box of dog food $(12$ cans$)$ is as follows:

Selling price $$22\mathrm{.}50$

Costs

$$ Direct materials $ $6\mathrm{.}25$

$$ Direct labour $(0\mathrm{.}5$ hours x $$15\mathrm{.}00)$ $$7\mathrm{.}50$

$$ Overhead $(0\mathrm{.}25$ machine hours $\backslash$times $$10)$ $$2\mathrm{.}50$

The food division is considering the following two special order requests to fill the remaining $20\%$ of capacity in the first quarter of fiscal $2024$:

$$Doggy Dog Ltd has asked for an all$-$chicken dog food that is similar to Munchie$$s regular dog food but which Doggy dog Ltd would like to market as its own. Doggy Dog Ltd is willing to pay $$15\mathrm{.}00$ each for $20,000$ boxes. The special order for Doggy Dog Ltd would have the same costs except for direct materials, which would be only $$5\mathrm{.}60$ per box.

$$ Top Dog Co$.$ has asked for $7,500$ boxes of beef and chicken dog food at $$18\mathrm{.}00$ per box. Each box of beef and chicken dog food would have the following cost data:

Direct materials $$8\mathrm{.}15$

Direct labour $(0\mathrm{.}5$ hours x $$15\mathrm{.}00)$ $$7\mathrm{.}50$

Overhead $(0\mathrm{.}50$ machine hours $\backslash$times $$10)$ $$5\mathrm{.}00$

Top Dog Co$.$ order will also result in $$3,750$ of setup costs and $$6,250$ for additional equipment, which will be used only for this order and then discarded.

The food division's manufacturing machine hours are limited to $7,500$ per month. The budgeted fixed overhead for this year is $$540,000.$ Total overhead is applied to production based on machine hours at $$10$ per hour.

The food division has the entire first quarter to work on the special orders if accepted. Each special order is isolated and not expected to result in future sales from either Doggy Dog Ltd or Top Dog Co$.$

Dog Treats

The food division has recently released plans to manufacture a new line of CBD dog treats, Downward Dog. They are designed to help pups with stress levels, pain and inflammatory response, joint mobility and skin conditions.

The target customers for Downward Dog$$s are:

$$ Owners of dogs with health and wellness concerns

$$ Interested in the novelty factor of the treats

$$ Regular Munchie$$s customers who purchase Downward Dogs out of interest in the new product

There is growing competition in the CBD pet food and treat market and Munchies is keen to bring Downward Dogs to market no later than July $1,2024.$ While the food division is currently in the product development phase, they have signalled that the target market date of July $1,2024,$ is feasible.