Special$-$Order Decision

Rianne Company produces a light fixture with the following unit cost:

Direct materials $$2$

Direct labour $1$

Variable overhead $3$

Fixed overhead $2$

Unit cost $$8$

The production capacity is $300,000$ units per year. Because of a depressed housing market, the company expects to produce only $180,000$ fixtures for the coming year. The company also has fixed selling costs totalling $$500,000$ per year and variable selling costs of $$1$ per unit sold. The fixtures normally sell for $$12$ each.

At the beginning of the year, a customer from a geographic region outside the area normally served by the company offered to buy $100,000$ fixtures for $$7$ each. The customer also offered to pay all transportation costs. Since there would be no sales commissions involved, this order would not have any variable selling costs.

Required:

$1.$ Conceptual Connection: Based on a quantitative $($numerical$)$ analysis, should the company accept the order?

$,$ the quantitative analysis is $fill in the blank $2$

in favour of

the special order.

$2.$ Conceptual Connection: What qualitative factors might impact the decision? Assume that no other orders are expected beyond the regular business and the special order.

The input in the box below will not be graded, but may be reviewed and considered by your instructor.