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Mother's Bottlers, Inc., is a small bottling company that bottles and sells cold teas for $3.15 per unit. The cost of each unit follows: Materials

Mother's Bottlers, Inc., is a small bottling company that bottles and sells cold teas for $3.15 per unit. The cost of each unit follows:

Materials $ 0.80
Labor 0.70
Variable overhead 0.40
Fixed overhead ($16,575 per month, 22,100 units per month) 0.75
Total costs per unit $ 2.65

One of Mother's regular customers asked the company to fill a special order of 400 units at a selling price of $2.40 per unit. Mother's can fill the order using existing capacity without affecting total fixed costs for the month. However, Mother's manager was concerned about selling at a price below the $2.65 cost per unit and has asked for your advice.

Required:
a.

Prepare a schedule to show the impact of providing the special order of 400 units on Mother's profits in addition to the regular production and sales of 22,100 units per month.

b.

Based solely on the data given, what is the lowest price per unit at which the bottled teas could be sold for the special order without reducing Mother's profits? (Round your answer to 2 decimal places.)

c.

If Mother's Bottlers, Inc was operating at capacity, what would happen to operating profit if the special order was accepted?

Increase?
Decrease?
No change?

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