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Question 2: (12 marks) (B1, CI) Ahlia Company produces golf discs which it normally sells to retailers for $6 each. The cost of manufacturing
Question 2: (12 marks) (B1, CI) Ahlia Company produces golf discs which it normally sells to retailers for $6 each. The cost of manufacturing 40,000 golf discs is: Materials Labor Variable overhead Fixed overhead Total $ 10,000 30,000 20,000 40,000 $100.000 Ahlia also incurs 5% sales commission ($0.30) on each disc sold. Zain Corporation offers Ahlia $4.25 per disc for 2,000 discs. Zain would sell the discs under its own brand name in foreign markets not yet served by Ahlia. If Ahlia accepts the offer, its fixed overhead will increase from $40,000 to $43,000 due to the purchase of a new imprinting machine. No sales commission will result from the special order. Instructions a. Prepare an incremental analysis for the special order. (9 marks) b. Should Ahlia accept the special order? Why or why not? Explain. (3 marks)
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