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VideoSecu produces wall mounts for flat panel television sets. Assume the forecasted income statement for next year is as follows. Sales ($28 per unit)
VideoSecu produces wall mounts for flat panel television sets. Assume the forecasted income statement for next year is as follows. Sales ($28 per unit) Cost of good sold ($19 per unit). Gross profit..... Selling expenses ($5 per unit) Net income... VIDEOSECU Budgeted Income Statement For the Year $5,600,000 (3,800,000) 1,800,000 (1,000,000) $ 800,000 Additional Information (1) Of the production costs and selling expenses, $1,520,000 and $750,000, respectively, are fixed. (2) VideoSecu received a special order from a hospital supply company offering to buy 10,000 wall mounts for $15. If it accepts the order, there will be no additional fixed selling expenses, and there is currently sufficient excess capacity to fill the order. The company's sales manager argues for rejecting the order because "we are not in the business of paying $19 to make a product to sell for $15." Required Do you think the company should accept the special order? Should the decision be based only on the profitability of the sale, or are there other issues that VideoSecu should consider? Explain.
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