GD Ltd produces cartridge oil filters for commercial vehicles. These oil filters are extremely popular because of their strength and durability; they also have exceptional filtration properties which improve engine performance. The company currently produces and sells 40 000 units at N$100 each. The operating results for last period are as follows: Sales 4 000 000 Less: Variable costs 1 597 500 Direct material 675 000 Direct labour 810 000 Variable overheads 112 500 Contribution 2 402 500 Less: Fixed costs 500 000 Net profit 1 902 500 GD Ltd has received an order from a new customer who requires an extra 15 000 oil filters at a discounted price of N$85 each. In order to fulfil this order, the direct labour workers would have to work overtime; this will cost the company an extra 15% in an overtime premium. Extra raw materials would have to be purchased and the company would qualify for a quantity discount of 2% on material purchases. The order would increase fixed cost by N$87 500. REQUIRED Marks 1.1. Why would a company consider special orders that are below normal selling price? 5 1.2. State whether the order should be accepted. (Draft a differential marginal cost statement to support your answer.) 20 TOTAL MARKS 25