Question
Kneller Co. manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has the capacity to produce 12,000 medals each month;
Kneller Co. manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has the capacity to produce 12,000 medals each month; current monthly production is 10,000 medals. The company normally charges $92 per medal. Cost data for the current level of production are shown below:
Variable costs: | ||
Direct materials | $ | 446,000 |
Direct labor | $ | 142,700 |
Selling and administrative | $ | 23,100 |
Fixed costs: | ||
Manufacturing | $ | 133,300 |
Selling and administrative | $ | 73,000 |
The company has just received a special one-time order for 400 medals at $76 each. For this particular order, no variable selling and administrative costs would be incurred. This order would also have no effect on fixed costs. Assume that direct labor is a variable cost.
Required:
Should the company accept this special order?
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