Marsdon Company Has an Annual Production Capacity of 15,000 Units

question 29

Essay

Marsdon Company has an annual production capacity of 15,000 units. The costs associated with production and sale of the company's product are given below:
$\begin{array}{lr}\text { Manufacturing costs: }\\\text { Variable } & \$ 12 \text { per unit } \\\text { Fixed (annual cost) } & \$ 90,000 \\\text { Selling and administrative costs: } & \\\text { Variable (sales commissions) } & \$ 3 \text { per unit } \\\text { Fixed (annual cost) } & \$ 60,000\end{array}$ The company presently is selling 12,000 units annually at a selling price of $28 each. A special order has been received from a distributor who wants to purchase 3,000 units at a special price of $20 each. Regular sales would not be affected by this order and the order could be filled without any impact on total fixed costs. Sales commissions on the special order would be reduced by one-third.
Required:
Determine whether the company should accept the special order.

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Definitions:

Captive Audience Meeting

A meeting where employees are required to attend, often used by employers to present information or views, particularly during union organizing efforts.

NLRA

The National Labor Relations Act of 1935, a foundational statute in United States labor law that protects the rights of employees to organize, bargain collectively, and strike.

Union Election

A formal voting process through which workers choose whether to be represented by a union and, if so, which union will represent them in bargaining with their employer.

Union Instrumentality

The means or methods through which a labor union seeks to protect the interests of its members, such as collective bargaining and industrial action.