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Marchant Industries, Which Produces Heating Blankets, Has Been Trying to Get

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Marchant Industries, which produces heating blankets, has been trying to get a customer, Home Select, Inc., to purchase a special order of heating blankets in order to keep the plant busy at a time when production is expected to be slower than normal. Home Select has agreed, but only if the price is reduced to $42. 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. Marchant Industries, which produces heating blankets, has been trying to get a customer, Home Select, Inc., to purchase a special order of heating blankets in order to keep the plant busy at a time when production is expected to be slower than normal. Home Select has agreed, but only if the price is reduced to $42. 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.   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 purchase this special order. Required: Determine the effect of the special order, if taken, on Marchant's total profit. 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 purchase this special order.
Required: Determine the effect of the special order, if taken, on Marchant's total profit.


Definitions:

Cost-Volume-Profit Chart

A graphical representation that shows the relationship between a company's cost, production volume, and profits.

Variable Costs

Charges that adjust based on the volume of sales or production levels.

Fixed Costs

Expenses that do not change as a function of the activity of a business, within the relevant period.

Break-Even Point

The level of sales at which total revenues equal total costs, resulting in no net loss or gain.

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