Muscat Company produces calculators which it normally sells to retailers for R.O. 7 each. The cost of manufacturing 20,000 calculators is: Materials R.O. 0.5 per unit Labor 1.5 per unit Variable overhead 1 Fixed overhead 2 Total R.O. 5 per unit

A foreign wholesaler offers Muscat Company R.O. 4.80 per calculator for 5,000 calculators. Acceptance of the offer would not affect normal sales of the product, and the additional units can be manufactured without increasing plant capacity. Muscat Company will incur additional shipping costs of R.O. 1.2 per unit. Instructions a. Prepare an incremental analysis for the special order. b. Should Muscat Company accept the special order? Why or why not? What costs should be considered in your increment analysis Relevant Costs ? Why? What costs should not be considered in your increment analysis Irrelevant Costs ? Why?