Special Order Total cost data follow for Glendale Manufacturing Company, which has a normal

capacity per period of 8,000 units of product that sell for $60 each. For the foreseeable future, regular

sales volume should continue to equal normal capacity.

Direct materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100,800

Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,400

Variable manufacturing overhead. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,800

Fixed manufacturing overhead (Note 1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,400

Selling expense (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,200

Administrative expense (fixed) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000

$298,600

Notes:

1. Beyond normal capacity, fixed overhead costs increase $1,800 for each 500 units or fraction thereof

until a maximum capacity of 10,000 units is reached.

2. Selling expenses consist of a 6% sales commission and shipping costs of 80 cents per unit. Glendale

pays only three-fourths of the regular sales commission on sales totaling 501 to 1,000 units and

only two-thirds the regular commission on sales totaling 1,000 units or more.

Glendales sales manager has received a special order for 1,200 units from a large discount chain

at a price of $36 each, F.O.B. factory. The controllers office has furnished the following additional

cost data related to the special order:

1. Changes in the products design will reduce direct materials costs $1.50 per unit.

2. Special processing will add 20% to the per-unit direct labor costs.

3. Variable overhead will continue at the same proportion of direct labor costs.

4. Other costs should not be affected.

Present an analysis supporting a decision to accept or reject the special order. (Round computa-

tions to the nearest cent.)

b. What is the lowest price Glendale could receive and still make a $3,600 profit before income

taxes on the special order?

c. What general qualitative factors should Glendale consider?