Question
Kneller Company manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has the capacity to produce 29,000 medals each month;
Kneller Company manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has the capacity to produce 29,000 medals each month; current monthly production is 10,000 medals. The company normally charges $86 per medal. Cost data for the current level of production are shown below:
Variable costs: | |
---|---|
Direct materials | $ 416,900 |
Direct labor | $ 133,400 |
Selling and administrative | $ 21,600 |
Fixed costs: | |
Manufacturing | $ 124,600 |
Selling and administrative | $ 68,200 |
The company has just received a special one-time order for 400 medals at $74 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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