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Sanders and Scott LLP, based in Philadelphia, is approached by a potential new customer to fulfill a one-time-only special order. Sanders and Scott LLP produces
Sanders and Scott LLP, based in Philadelphia, is approached by a potential new customer to fulfill a one-time-only special order. Sanders and Scott LLP produces 49,000 units for regular customers and the factory has a capacity of 50.000 units. The following per unit data apply for sales to regular customers: Variable Costs: Direct Materials $120 Direct Labor 80 Manufacturing Support 125 Selling Costs 115 Fixed Costs: Manufacturing Support 190 Marketing Costs 70 Total Costs 700 Profit (40%) $280 Targeted Selling Price $980 Should Sanders and Scott LLP accept the special order if the new customer offers to pay $420 per unit for 500 units? Yes, because the special order will increase operating income by $10,000 Yes, because the special order will increase operating income by $47,500 No, because the special order will decrease operating income by $10,000 No, because the special order will decrease operating income by $47,500
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