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Required: (i) What will be the effect on operating income if the special order is accepted? Should Perry Company accept the special order? (5 marks)
Required: (i) What will be the effect on operating income if the special order is accepted? Should Perry Company accept the special order? (5 marks) (ii) State and explain TWO (2) risks of selling to the wholesaler at such a low price. (3 marks) PartC San Company produces two types of components, K and P. The unit contribution margin for K is $6; the unit contribution margin for P is $14. Each component must spend time on a special machine which provides 4,000 hours of machine time per year. K requires 15 minutes of machine time; P requires 30 minutes of machine time. Required: (i) Now suppose that San Company can sell only 5,500 units of each component. How many units of K and P should be produced? (6 marks) (ii) What are TWO (2) qualitative factors that might affect a keep or drop decision
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