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Structuring a Special-Order Problem Harrison Ford Company has been approached by a new customer with an offer to purchase 10,000 units of its model 15
Structuring a Special-Order Problem Harrison Ford Company has been approached by a new customer with an offer to purchase 10,000 units of its model 15 at a price of $4.00 each. The new customer is geographicaliy separated from the company's other customers, and existing sales would not be affected. Harrison normally produces 75,000 units of Is per yeor but only plans to produce and 50 ell 60,000 in the coming year. The normal sales price is $12 per unit. Unit cost information for the normal level of activity is as follows: Fixed overhead will not be affected by whether or not the special order is accepted. Required: 1. Should the compony accept or reject the speciat order? 2. By how much will operating income increase or decrease if the order is accepted? bys
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