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Sam's Shoes manufactures athletic shoes sold to sporting goods stores for $60 each. The plant capacity is 300,000 pairs annually, but normal volume is 250,000

Sam's Shoes manufactures athletic shoes sold to sporting goods stores for $60 each. The plant capacity is 300,000 pairs annually, but normal volume is 250,000 pairs. Unit and total costs at normal volume are as follows:

Type of Cost

Unit Costs

Total Costs

Direct materials

$15.00

$3,750,000

Direct labor

$12.00

$3,000,000

Manufacturing support

$18.00

$4,500,000

Selling and administrative

$8.00

$2,000,000

Total costs

$53.00

$13,250,000

Fixed manufacturing support costs are $2,500,000, and fixed selling and administrative costs are $1,500,000.

A customer offers to buy 60,000 pairs at $45 each, with simplified packaging reducing variable selling and administrative costs by 40%.

Required: Evaluate if Sam's Shoes should accept the special order. Prepare a cash flow analysis to support your decision.

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