Question 2 Teering Company produces smoothie blenders that it sells for $38 each. At full capacity, the company can produce 50,000 blenders a year. The costs of producing and selling 50,000 blenders are as follows: Cost per Blenders $13 Total Costs $ 650,000 Direct materials Direct manufacturing labor 4 250,000 Variable manufacturing overhead 2.5 125,000 Fixed manufacturing overhead 6 300,000 Variable selling expenses 3 150,000 Fixed selling expenses 2 100,000 Total costs $30.5 $1,575,000 Required: (a) Suppose Teering Company produces and sells 40,000 blenders. At this level of production and sales, its fixed costs are the same as given in the preceding table. Siesta Company wants to place a one-time special order for 10,000 blenders at $22 each. Teering will incur no variable selling costs for this special order. Should Teering accept this one-time special order? Show your calculations and explain if fixed costs are relevant in your decision? (4 marks) (b) In the current year, Teering is producing and selling 50,000 instead of 40,000 blenders. If Teering accepts Siesta's special order, it will have to sell 10,000 fewer blenders to its regular customers. (13 marks) (i) On financial considerations about the current year, should Teering accept this one-time special order? Show your calculations specifying the amount of contribution margin lost on existing sales. (ii) On financial considerations about the current year alone, at what price would Teering be indifferent between accepting the special order and continuing to sell to its regular customers at $38 per blender. Explain the relationship between the incremental revenues computed in b(i). above and the answer here? (iii) If Teering is able to charge Siesta $38 per blender, explain whether Teering will accept the one-off special order after considering the effects on existing sales