Question
Quality Products produces and sells screen-printed t-shirts to local organizations. The normal sales price per shirt is $12. Due to setup costs, they only accept
Quality Products produces and sells screen-printed t-shirts to local organizations. The normal sales price per shirt is $12. Due to setup costs, they only accept orders of at least 100 shirts. The setup cost per order is $40 and the variable costs per shirt are $3. Fixed overhead costs per month total $2,000. Quality Products has the capacity to screen-print as many as 5,000 shirts per month, but is currently producing around 3,000. On May 1, the company was approached by a local non-profit group who wishes to place a single order for 100 shirts. The non-profit group has indicated that they can only pay $5 per shirt.
List two qualitative factors that should be considered by Quality Products before accepting the special order? |
From a quantitative basis, should they accept the special order? By what amount will Quality Products net income increase or decrease if they accept the special order?
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