QUESTION 1

XL Corp. has excess manufacturing capacity. The company has received a special order from XS Company requesting 500 of XL's computer keyboards at a price of $65 each. The keyboards will require special engraving of SX's corporate logo. XS needs the keyboards because its normal supplier has shut down production due to a labor strike.

XL's normal selling price is $85 per unit. Managers estimate the variable cost of thekeyboards at $35 per unit; fixed manufacturing overhead is $40 per unit. If the XL order is accepted, additional fixed costs of $8,000 will be incurred due to the rental of a special machine needed to etch XS's corporate logo; the remainder of the fixed cost is attributable to costs that will be incurred regardless of whether the keyboards are produced.

Give the above information, should XL accept the offer from XS? A YES OR NO ANSWER IS NOT SUFFICIENT. SHOW ALL OF YOUR NUMERICAL WORK!

QUESTION 2

List 2 qualitative factors that must be considered in making the decision to accept or reject the XS offer.