Incremental Analysis:

Special Order:

Liu Co. manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has the capacity to produce 15,000 medals each month; current monthly production is 12,750 medals. The company normally charges $120 per medal. Cost data for the current level of production are shown below:

	Variable costs:
	Direct materials.....................................	$624,750
	Direct labor............................................	$306,000
	Selling and administrative.....................	$15,300
	Fixed costs:
	Manufacturing.......................................	$506,175
	Selling and administrative.....................	$123,675

The company has just received a special one-time order for 700 medals at $83 each. For this particular order, no variable selling and administrative costs would be incurred. This order would also have no effect on fixed costs.

Required:

a. Should the company accept this special order? Why?

b. In making this decision what other factors should the company consider?