Requirement 3. As in requirement 1, assume that monthly capacity is

11,000 windows. AwardOne is concerned that if it accepts the special order, its existing customers will immediately demand a price discount of $20 in the month in which the special order is being filled. They would argue that AwardOne's capacity costs are now being spread over more units and that existing customers should get the benefit of these lower costs. Should

AwardOne accept the special order under these conditions? Show your calculations. Select the labels and then enter the amounts to calculate the net effect on operating income from accepting the special order under this scenario. (Use a minus sign or parentheses to show a net decrease in operating income from accepting the special order. Abbreviations used: Operating income = OI; Special order = SO.)

AwardOne

has just received a special one-time-only order for 1,000 windows at $200 per window. Accepting the special order would not affect the company's regular business or its fixed costs.

AwardOne makes windows for its existing customers in batch sizes of 200 windows (50

batches x 200 windows per batch = 10,000= windows). The special order requires

AwardOne to make the windows in 8 batches of 125 windows

Variable c

osts that vary with number of units produced

Direct materials

$400,000

Direct manufacturing labour

350,000

Variable costs (for setups, materials handling, quality control, and so on)

that vary with number of batches, 50 batches x $800 per batch

40,000

Fixed manufacturing costs

100,000

Fixed marketing costs

150,000

Total

costs $1,040,000

Net increase (decrease)

-

=

in OI from accepting SO

-

=

?