Vlados Company produces sound systems for cars and sells them to automotive manufacturers for

$150 each. Full capacity is 21,000 systems per month, but it is currently producing 19,000 systems

per month for its regular customers. The company reports the following monthly results:

Per Unit, USD Total, USD

Revenue 150.00 2,850,000

Direct material 37.50 712,500

Direct manufacturing labor 18.00 342,000

Variable manufacturing overhead 22.00 418,000

Fixed manufacturing overhead 8.00 152,000

Variable marketing, distribution expenses 30.00 57,000

Fixed marketing, distribution expenses 10.00 190,000

Total costs 125.00 2,384,500

Operating Profit 24.50 465,500

Companys manager, Dansali Menyaev, receives a call regarding a one-time special order: Sary Arka

Automotive needs 2,000 systems and will pay $90 per system. Vlados will incur no selling costs for

the special order.

Required

A. Should Dansali accept this one-time special order? What would monthly operating income be

if Vlados did accept Sary Arkas order?

B. Sary Arkas manager calls again: They've run some new calculations, and they really need

2,500 systems at the same $90 price. It will have to be an all-or-nothing deal. Dansali thinks,

Now they're pushing it . . . Sary Arka's order will displace some of the volume I sell to my

regular customers who are a lot more profitable for us. Assuming that Vlados regular

customer relationships will not suffer due to a small one-time volume reduction, and based

on financial considerations alone, what should Dansali do? Provide specific calculations and

explain your reasoning.

C. Assuming that regular customer relationships will not suffer due to a small one-time volume

reduction, up to what volume is Vlados better off supplying to Sary Arka at a selling price of

$90?