Winners Circle, Inc. manufactures medals for winners of athletic events and other contests. Its manufacturing plant has the capacity to produce 2,700 medals each month. Current monthly production is 2,025 medals. The company normally charges $530 per medal. Variable costs and fixed costs for the current activity level of 75 percent of capacity are as follows:

Production Costs
Variable costs:
Manufacturing:
Direct labor	$	263,250
Direct material		232,875
Marketing		151,875
Total variable costs	$	648,000
Fixed costs:
Manufacturing	$	207,450
Marketing		177,300
Total fixed costs	$	384,750
Total costs	$	1,032,750
Variable cost per unit	$	320
Fixed cost per unit		190
Average unit cost	$	510

Winners Circle has just received a special one-time order for 675 medals at $305 per medal. For this particular order, no variable marketing costs will be incurred. Cathy Donato, a management accountant with Winners Circle, has been assigned the task of analyzing this order and recommending whether the company should accept or reject it. After examining the costs, Donato suggested to her supervisor, Gerard LePenn, who is the controller, that they request competitive bids from vendors for the raw material as the current quote seems high. LePenn insisted that the prices are in line with other vendors and told her that she was not to discuss her observations with anyone else. Donato later discovered that LePenn is a brother-in-law of the owner of the current raw-material supply vendor.

Problem 14-56 Part 2

1. 2-a. Compute both the new average unit cost and the incremental unit cost for the special order.
2. 2-b. Should Winners Circle, Inc. accept the special order?

New average unit cost
Incremental unit cost