IBM is evaluating a special order for 5,000 units at a price of $30 per unit. The following cost information is provided:
•Direct materials: $12 per unit
•Direct labor: $8 per unit
•Variable overhead: $5 per unit
•Fixed overhead: $3 per unit (allocated)
Required:
1.Calculate the total relevant costs for the special order.
2.Determine the impact on IBM's operating income if the order is accepted.
3.Discuss the strategic implications of accepting special orders.