Special Order

Pete's Pizza makes the best pizzas in town. Based on Pete's current volume, the price and cost breakdown is outlined below.

The local high school has asked Pete to be their sole pizza provider for a large event and has offered to order $500$ pizzas at a special price.

Assuming Pete has the capacity to produce these pizzas, identify which of the following items are relevant in deciding whether to accept this specia

$\backslash$table$[[$Normal sales price,Per unit,Relevant?$],[$$$,12\mathrm{.}00,],[$Special price,,$9\mathrm{.}50,],[$Direct materials,,$4\mathrm{.}00,],[\backslash$table$[[$Direct labor$],[$Variable overhead$]],,3\mathrm{.}00,6],[\backslash$table$[[$Variable overhead$],[$Fixed overhead$]],,\backslash$table$[[0\mathrm{.}50],[3\mathrm{.}00]],]]$

Should Pete accept the order in either of the following scenarios?

A$.$ Pete has capacity to produce these pizzas with no additional investments.

B$.$ Pete would need to rent a piece of equipment to accommodate the order. The rent would cost Pete:

For each scenario below, enter the relevant amounts of accepting this special order of $500$ pizzas in total $($not per unit$)$:

$\backslash$table$[[$Scenario$],[$A B$]]$

Number of pizzas ordered

Enter $"=0"$ in the cell for any cost not relevant to the decision.

Sales revenue

Variable costs

Direct materials

Direct labor

Variable overhead

Fixed overhead

Total costs

Expected change in operating income

Should Pete accept the order? $$