The manufacturing capacity of North Wind Corporations facilities is 50,000 units of product a year. A summary of operating results for the year end December 31,20CY is as follows:

Total Per Unit

Sales (38,000 units) 3,800,000 100.00

Less: Variable cost and expenses 2,090,000 55.00

Contribution margin 1,710,000 45.00

Less: Fixed costs and expenses 900,000

Operating income 810,000

A distributor company has offered to buy 12,000 units at 90 per unit in the following years.

Assume that all of the corporations cost next year would be at the same levels and rates as in the prior year.

Required: Should North Wind Corporation accept or reject the special sales order? Show your supporting computation.

(Consider the following cases independently)

1. The corporation has no alternative use of the capacity.

2. The corporation can rent out the idle capacity for 200,000

3. The corporation can use the idle capacity to produce a new product that could contribute a 600,000 contribution margin.

4. If the special order is accepted, 2,000 units of regular sales are expected to be lost.

5. Assuming a distributor has ordered 16,000 units and the corporation has to sacrifice some of its regular customers to accommodate the special order.