REQUIRED:

1. Should Koho accept the order?Show the total effect on income if this order is accepted. (Please Show all Calculations.)
2. Identify two qualitative factors that should be considered before accepting a special order.

Koho Ltd. produces handheld portable televisions. The normal selling price is $400 and its unit production cost is $264 as detailed below:

Direct Materials$143

Direct labour$86

Manufacturing overhead$35

80% of the manufacturing overhead is fixed, with the remaining 20% being variable.

The company's annual capacity is 10,000 units and they are currently operating at 95% of capacity.It historically sells all that it produces.The company has been approached by a customer, located outside Koho's normal market, who wants to make a one-time purchase of 2,000 custom televisions at $350 per television.There will be no change to the unit direct material cost; however, a special process will add an additional $6 per television to direct labour.

In order to make this special order, Koho will have to buy a specialized piece of equipment for $2,000.This equipment will have no use after the special order is completed.