Q#1HASF & Company produces cleaning kits for shotguns. The production capacity available will enable the firm to produce 5,000 kits annually. A projected income statement for next year shows Sales 460,000 Costs of goods sold 296,000 Gross profit 164,000 Selling and administrative expenses 125,000 Net income 39,000 Fixed manufacturing overhead costs 40% of the cost of goods sold. Regular selling price per unit is 10 A 10% sales commission is paid to sales representatives for each kit sold. The purchasing department of a large discount chain has offered to purchase 1500 kits at $6 each. Company sales managers initial response is to refuse the offer because he concludes that the $6 price is below the firms average cost The sales commission would not be paid on the special order. Required: A. Should the special offer be accepted? What would be the impact on net income? C. Ignore part B. What is the lowest price the firm could accept if it wants to earn annual net income of 48,000

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