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Mario, Co. produces electronic shoes that make you jump 10% higher. The selling price is $70 per unit (i.e., per pair). The unit cost of
Mario, Co. produces electronic shoes that make you jump 10% higher. The selling price is $70 per unit (i.e., per pair). The unit cost of producing/selling is as follows: Direct materials $24.00 Direct labor 15.50 Variable overhead 9.00 Fixed overhead 5.00 Variable SG&A 3.00 Fixed SG&A 2.00 Total cost per unit $58.50 Bowser Inc., a company that runs leisure facilities, has asked Mario to sell 1,000 units of the shoes at a discounted price. Mario has enough excess capacity to fulfill this one-time-only special order. Assume that Mario has no alternative use for the excess capacity and that unit variable SG&A costs will remain the same for the special order. Answer the following questions separately: 1. (For this question only) assume that Bowser asked for a discounted price of $50 per unit. Should Mario accept this special order? Explain in detail. (10 points) 2. (For this question only) assume that Bowser asked for a discounted price of $55 per unit and wants the shoes to be customized. Mario estimates that the costs associated with the customization would be total $2,500, all fixed. Should Mario accept this special order? Explain in detail. (10 points)
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