Smooth Move Company manufactures professional paperweights and has been approached by a new customer with an offer to purchase 15 000 units at a per-unit price of R70. The new customer is geographically separated from Smooth Move's other customers, and existing sales will not be affected. Smooth Move normally produces 82 000 units but plans to produce and sell 65 000 in the coming year. The normal sales price is R120 per unit. Unit cost information is as follows:

Direct materials - R31; Direct labour - R22.50; Variable overhead - R11.50 &

Fixed overhead - R18.

Suppose the customer wants to have its company logo affixed to each paperweight using a label. Smooth Move would have to purchase a special logo labelling machine that will cost R120 000. The machine will be able to label the 15 000 units and then it will be scrapped (with no further value). No other fixed overhead activities will be incurred. In addition, each special logo requires additional direct materials of R2.

Required:

a. Should Smooth Move accept the order? Show calculations.

b. By how much will profit increase or decrease if the order is accepted?