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To keep the plant busy at a time when production is expected to be slower than normal, Marchant Industries (which produces heating blankets) has
To keep the plant busy at a time when production is expected to be slower than normal, Marchant Industries (which produces heating blankets) has been trying to get a customer, Home Select, Incorporated, to purchase a special order of heating blankets. Home Select has agreed, but only if the per-unit price is reduced to $42.00. Listed below are some data prepared by Marchant. The special order can be produced within available capacity, and will be made in a single batch. Next Month's Operating Information Sales 10,000 units (made in 10 batches of 1,000 each) Sales Price Per Unit $65 Per-unit costs: Variable Manufacturing Costs 28 Batch-level manufacturing costs 12 Variable Marketing Costs Fixed Manufacturing Costs Fixed Marketing Costs Special Order Information Sales Sales Price Per Unit 8 6 3 5,000 units $42 There are no variable marketing costs associated with the special order, but Ruby Marchant, the president of the firm, has spent $1,500 during the past month trying to get Home Select to execute this special sales order. Required: 1. Determine the effect of the special order, if taken, on Marchant's total operating profit. 2. List three non-financial factors that should be considered in this decision.
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