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The Award Plus Company manufactures medals for winners of athletic events and other contests. Its manufacturing plant has the capacity to produce 10 000 medals
The Award Plus Company manufactures medals for winners of athletic events and other contests. Its manufacturing plant has the capacity to produce 10 000 medals each month. Current production and sales are 7 500 medals per month. The company normally charges R150 per medal. Cost information for the current activity level is as follows: R262 500 R300 000 R75 000 Variable costs that vary with number of units produced Direct materials Direct manufacturing labour Variable costs (for setups, materials handling, quality control, and so on) that vary with number of batches, 150 batches x R500 per batch) Fixed manufacturing costs Fixed marketing costs Total costs R275 000 R175 000 R1 087 500 Award Plus has just received a special one-time-only order for 2 500 medals at R100 per medal. Accepting the special order would not affect the company's regular business. Award Plus makes medals for its existing customers in batch sizes of 50 medals (150 batches x 50 medals per batch = 7 500 medals). The special order requires Award Plus to make the medals in 25 batches of 100 each. Required: 3.1 Should Award Plus accept this special order? Show your calculations. 3.2 Suppose plant capacity were only 9 000 medals instead of 10 000 medals each month. The special order must either be taken in full or rejected completely. Should Award Plus accept the special order? Show your calculations
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