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Polarcreme, Inc., an ice cream manufacturer, is operating at 80% of its productive capacity of 10 million one-quart units. An ice cream distributor from outside

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Polarcreme, Inc., an ice cream manufacturer, is operating at 80% of its productive capacity of 10 million one-quart units. An ice cream distributor from outside Polarcreme's territory has offered to buy 2 million units at $1.75 per unit, provided its own label can be attached to the product. Normal selling price is $2.50 per unit. Cost information: Total costs 8,000,000 units Per unit costs Variable costs Direct materials Direct labor Packaging Commissions Distribution Other variable costs Non-unit level costs Purchasing ($8 x 40,000 purchase orders) Receiving ($6 x 80,000 receiving orders) Setups ($8,000 x 50 setups) Fixed costs Total costs $ 7,600,000 2,000,000 1,600,000 160,000 240,000 400,000 $0.95 0.25 0.20 0.02 0.03 0.05 320,000 480,000 400,000 1,600,000 $14,800,000 0.04 0.06 0.05 0.20 $1.85 The special order will not require commissions or distribution (the buyer will pick up the order). Other requirements: 10,000 purchase orders 20,000 receiving orders 13 setups The one-time cost for the new label template will cost $24,500. (1) Identify the decision to be made. (2) List the relevant benefits and costs for each alternative. (3) Which alternative is more cost effective and by how much? (4) What if accepting the special order upset a regular customer who then decided to take its regular annual order of 2 million units to another manufacturer. Which alternative would be better

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