Rianne company produces a light fixture with the following unit cost:

Direct materials $2

Direct labour $1

Variable overhead $3

Fixed overhead $2

Unit cost $8

The factory production capacity is 300 000 fixtures per year. But because of depressed housing market the company is planning to only produce 180 000 units for the coming year. The company also has a fixed selling cost of $500 000 per year and variable selling cost of $1 per unit sold. The fixtures normally sell for $12 per unit.

At the beginning of the year a customer from a geographical area normally not served by the company offered to buy 100 000 units at a price of $7 each. The customer also offered to pay all transportation cost. Since there will be no sales commission involved, this order would not have any variable selling cost.

REQUIRED:

Based on the numerical analysis should the company accept this order?

What other factors might affect the decision? Assume that no other sales is expected beyond the regular business and the special order.

The special-order price is well below the companys normal price. Will this have a potential impact on regular customers?