The XYZ Company manufactures awards for gymnastics meets and charity races. 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 $150 per medal. Cost information for the current production level of 7,500 medals is as follows:

Variable costs that vary with number of units produced. Direct materials $262,500 Direct labor $300,000 Variable MOH $75,000 Fixed manufacturing overhead $275,000 Fixed marketing costs $175,000 Total costs $1,087,500

Fixed MOH and fixed marketing costs could be used to serve up to 10,000 medals each month. XYZ Company has just received a special one-time-only order for 2,500 medals at $100 per medal. Accepting the special order would not affect the company's regular business.

Answer the three following questions

1) How much will the special order increase (decrease) the operating income from what it would be when only 7,500 medal are produced and sold at $150 per medal? Should XYZ take the special order or decline it?

Suppose the plant capacity were only 9,000 medals instead of 10,000 medals each month. The special order must either be taken in full (i.e. 6,500 medals for existing customers and 2,500 medals for the special order) or be rejected completely (i.e. producing 7,500 medals for only existing customers).

2) How much will the special order increase (decrease the operating income from what it would be when only 7,500 medals are produced and sold at $150 per medal? Show your work.

3) If XYZ decides to accept the special order, what should be the minimum special order price per unit for the firm to at least maintain the same profit as that from selling 7,500 medals at $150 per medal?