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Skylark Company Limited has an annual plant capacity of 25,000 units. Forecasted data on sales and costs are given below. Sales (20,000 units @ Rs.50)

Skylark Company Limited has an annual plant capacity of 25,000 units. Forecasted data on sales and costs are given below.

  • Sales (20,000 units @ Rs.50) Rs.10,00,000

  • Manufacturing costs:

  • Variable (materials, labor, and overhead) Rs.40 per unit
  • Fixed overhead Rs.30,000

  • Selling and administrative expenses:
    • Variable (including sales commission-Rs.1

per unit) Rs.2 per unit

      • Fixed Rs.7,000

A special order has been received from Hichang Ltd., China, by the Skylark Company for 4,000 units at a selling price of Rs.45 each. This order will have no effect on regular sales. The sales commission on this order will be reduced by one-half. Should the Skylark Company accept the special order? Support your suggestion with supporting calculations.

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