EXAMPLE 2: SPECIAL ORDER Fancy Fabrics manufactures quality bath towels at its highly automated Charlotte NC plant. The plant has a monthly capacity of 48,000 towels. Current production is 30,000 towels and the sales price is $20 per towel. Expected costs are: Direct materials Direct labor Variable OH Fixed OH Variable Selling Fixed Selling $ 6.00 .50 1.00 4.50 5.00 2.00 $19.00 A luxury hotel chain offers to buy 15,000 towels per month at $11 a towel. Selling costs will not apply to this special order. Should Fancy Fabrics accept this order? How much will income increase (decrease)? Sales px (Increase in revenue) -Increase in relevant variable costs (RVC): Direct materials Direct labor Variable OH CM of special order/unit X # of units Total CM of special order - Increase in relevant fixed costs (RFC) Inc./(Dec.) in income