Minor Electric Has Received a Special One-Time Order for 1,500

question 112

Multiple Choice

Minor Electric has received a special one-time order for 1,500 light fixtures (units) at $5 per unit.Minor currently produces and sells 7,500 units at $6.00 each.This level represents 75% of its capacity.Production costs for these units are $4.50 per unit,which includes $3.00 variable cost and $1.50 fixed cost.To produce the special order,a new machine needs to be purchased at a cost of $1,000 with a zero salvage value.Management expects no other changes in costs as a result of the additional production.Should the company accept the special order?

• A)No,because additional production would exceed capacity.
• B)No,because incremental costs exceed incremental revenue.
• C)Yes,because incremental revenue exceeds incremental costs.
• D)Yes,because incremental costs exceed incremental revenues.
• E)No,because the incremental revenue is too low.