Problem 6-25B Effect of order quantity on special order decision

Schmidt Company made 100,000 electric drills in batches of 1,000 units each during the prior accounting period. Normally, Schmidt markets its products through a variety of hardware stores. The following is the summarized cost to produce electric drills:

Materials cost ($20.00 per unit 100,000)	$2,000,000
Labor cost ($12.00 per unit 100,000)	1,200,000
Manufacturing supplies ($1.00 100,000)	100,000
Batch-level costs (100 batches at $4,000 per batch)	400,000
Product-level costs	300,000
Facility-level costs	360,000
Total costs	$4,360,000
Cost per unit = $4,360,000 100,000 = $43.60

Required

Bypassing Schmidts regular distribution channel, Vestavias Home Maintenance Company has offered to buy a batch of 500 electric drills for $39 each directly from Schmidt. Schmidts normal selling price is $54 per unit. Based on the preceding quantitative data, should Schmidt accept the special order? Support your answer with appropriate computations.

Would your answer to Requirement a change if Vestavias offered to buy a batch of 1,000 electric drills for $39 each? Support your answer with appropriate computations.

Describe the qualitative factors that Schmidt should consider before accepting a special order to sell electric drills to Vestavias.