The Dial Company specializes in producing a set of wood patio furniture consisting of a table and four chairs. The set enjoys great popularity, and the company has ample orders to keep production going at its full capacity of 3,000 sets per year. Annual cost data at full capacity follow: Direct Labor 117,000 $ Advertising 45,000 $ Factory Supervision 42,000 $ Property Taxes, factory building 4,500 $ Sales Commissions 75,000 $ Insurance, factory 2,400 $ Depreciation, admin office equip 4,200 $ Lease cost, factory equipment 15,000 $ Indirect Materials, factory 4,800 $ Depreciation, factory building 9,000 $ Admin office supplies (billing) 3,300 $ Admin office salaries 66,000 $ Direct Materials Used 96,000 $ Utilities, Factory 18,000 $ The patio sets are normally sold for $220 per set. Dial can increase capacity by 1,000 units, but must pay $128,000 to do so. If a special order is accepted, no sales commissions will need to be paid.

Annual cost data for the production of 3,000 sets are classified as follows:

Cost Item	Cost Behavior		Selling and Admin Expense	Product Costs
	Variable	Fixed		Direct	Indirect
Direct Labor	117,000			117,000
Advertising		45,000	45,000
Factory Supervision		42,000			42,000
Property Taxes, factory building		4,500			4,500
Sales Commissions	75,000		75,000
Insurance, factory		2,400			2,400
Depreciation, admin office equip		4,200	4,200
Lease cost, factory equipment		15,000			15,000
Indirect Materials, factory	4,800				4,800
Depreciation, factory building		9,000			9,000
Admin office supplies (billing)	3,300		3,300
Admin office salaries		66,000	66,000
Direct Materials Used	96,000			96,000
Utilities, Factory	18,000				18,000
Total Cost	314,100	188,100	193,500	213,000	95,700

For the following questions, please use the information on pages 1 and 2 to help support your decisions. Please document your answer in a clear, concise way and reference any numbers that were used to make your decision. Each question is independent and refers to the original data unless specified otherwise. For each question, please use up to 100 words. Each question is worth 6 points.

1. Assume demand for 2020 is 1,800 units, what would be the minimum price that you would charge if you wanted to make a profit. Why is this the correct price? Please explain your calculations

2. If demand for 2020 is instead 3,600 units, should the company pay to increase their capacity? Why? Please explain your calculations. Assume units are sold at the normal price.

3. Assume demand is 2,980 units for 2020. If the company receives a special order for the next 20 units at $100 per set ($2,000 in total), would you accept this order? Why? Assume there is no better offer for the last ten units.

4. Assume demand can be 4,200 units in 2020 if the company pays to increase their capacity and if the company does additional online advertising that would cost $15,000. Assume the normal selling price of $220 per set. Would you advise the company to pay to increase capacity and pay for the additional online advertising? Why? Please explain your calculations.

5. Assume demand for 2020 is 3,200 units and you have decided that it is not worth it for Dial to expand production capacity. A competitor says that her company can supply you with 100 units for $10,000 and Dial can sell these units at the normal price. Will you advise Dial to take the offer and how does this compare to your own costs of making 100 additional units (do not consider the capacity expansion costs)?