Special Order Total cost data follow for Greenfield Manufacturing Company, which has a normal capacity per period of 20,000 units of product that sell for $54 each. For the foreseeable future, regular sales volume should continue to equal normal capacity.

Direct material				$266,800
Direct labor				200,000
Variable manufacturing overhead				152,000
Fixed manufacturing overhead (Note 1)				118,800
Selling expense (Note 2)				129,600
Administrative expense (fixed)				50,000
				$917,200

Notes: 1. Beyond normal capacity, fixed overhead costs increase $4,500 for each 1,000 units or fraction thereof until a maximum capacity of 24,000 units is reached. 2. Selling expenses consist of a 10% sales commission and shipping costs of $1 per unit. Greenfield pays only one-half of the regular sales commission rates on sales amounting to $3,000 or more.

Greenfields sales manager has received a special order for 2,500 units from a large discount chain at a price of $44 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 material costs by $4 per unit. 2. Special processing will add 10% 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.

a. Present an analysis supporting a decision to accept or reject the special order. (Round computations to the nearest cent.)

b. What is the lowest price Greenfield could receive and still make a profit of $5,000 before income taxes on the special order?

I tried (19,250 - 5,000 ) / 2,500 = 5.7

44 - 5.7 = 38.3 which is incorrect ..

Differential Analysis Per Unit Total Differential revenue S 110,000 Differential costs Direct material 9.34 Direct labor Variable manufacturing overhead 8.36 Selling: Commission 2.2 M Shipping (FO.B. factory terms) Total variable cost 30.9 77,250 Contribution margin from special order 32.750 Fixed cost increment: Extra cost 13,500 Profit on special order 19 250