Ricky Sports Company produces baseballs bats which it normally sells to retailers for $6 each. The cost of manufacturing 25,000 baseball bats is:

Materials $ 10,000

Labor 30,000

Variable overhead 20,000

Fixed overhead 40,000

Total $100,000

Ricky also incurs 5% sales commission ($0.30) on each bats sold.

Cuco Inc. offers Ricky $4.25 per bats for 3,000 bats. Cuco inc. sell the bats under its own brand name in others markets not yet served by Ricky. If Ricky accepts the offer, its fixed overhead will increase from $40,000 to $43,000 due to the purchase of a new imprinting machine. No sales commission will result from the special order.

Instructions

1. Prepare an incremental analysis for the special order.

2. Should the special order will be accept? Why?