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Kneller Company manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has the capacity to produce 22,000 medals each month;

Kneller Company manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has the capacity to produce 22,000 medals each month; current monthly production is 10,000 medals. The company normally charges $116 per medal. Cost data for the current level of production are shown below:

Variable costs:
Direct materials $ 562,300
Direct labor $ 180,000
Selling and administrative $ 29,200
Fixed costs:
Manufacturing $ 168,500
Selling and administrative $ 92,200

The company has just received a special one-time order for 500 medals at $103 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?

multiple choice

  • Accepted

  • Not accepted

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