Mitsu Lighting Sdn Bhd produces light fixture with the following unit cost:

RM

Direct materials 2.00

Direct labour 1.00

Variable Overhead 3.00

Fixed overhead 2.00

Total Cost RM8.00

The production capacity is 300,000 units per year. Because of a depressed economy due to COVID-19, the company expects to produce only 180,000 light fixtures for 2021. The company also has fixed selling costs totalling RM 500,000 per year. The fixtures sell for RM 12.00 each and variable selling cost of RM 1.00 each

In July 2021, a customer from Sri Lanka which is outside the area normally served by Mitsu Lighting Sdn Bhd offered to buy 100,000 fixtures for RM 7.00 each. The customer also offered to pay all transportation cost. Since there is no sales commission involved, this order would not have any variable selling expense.

Required:

a) Prepare an increment analysis of the special order.

(15 marks)

b) Should Mitsu Lighting Sdn Bhd accept the special order? Explain your answer. (2 marks)

c) What non-financial factors should management consider in making its decision? (8 marks)