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Question 1 - Special Order: Starcourt, Inc. produces a single product. The cost of producing and selling a single unit of this product at the
Question 1 - Special Order: Starcourt, Inc. produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 20,000 units per year is: Direct materials $6.25 Direct labor $7.05 Variable manufacturing overhead $3.10 Fixed manufacturing overhead $4.70 Variable selling and administrative expense$1.90 Fixed selling and administrative expense $3.20 The normal selling price is $28.00 per unit. The company's capacity is 30,000 units per year. An order has been received from a mail-order house for 4,000 units at a special price of $20.00 per unit. This order would not affect regular sales or the company's total fixed costs. a. Calculate the financial advantage (disadvantage) of accepting the special order. b. Based on your answer to part a, and assuming all else equal, should Starcourt accept this special order? Briefly explain why or why not
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