Question No. One

"MBACO" has an annual production capacity of 20,000 units. The costs associated with production and sale of the company's product are given below:

Manufacturing costs:	LE
Per unit variable	12
Per unit fixed	5
Selling and administrative costs:
( Include sales commissions 4% of sales)	3
Per unit Fixed	3

The company presently is selling 15,000 units annually at a selling price of LE 25 each. A special order has been received from a distributor who wants to purchase 5,000 units at a special price. Regular sales would not be affected by this order and the order could be filled without any impact on total fixed costs. Sales commissions per unit on the special

order would be reduced by 50%. If the special sales order is accepted the company expects to achieve net profit LE 25000 from the regular sales and special sales order.

Required:

1- Prepare a detailed income statement if the special sales order is accepted .

2- What are the necessary conditions to accept or reject this special sales order?