Peters,Inc A Foreign Company Wants to Purchase 15,000 Units

question 6

Essay

Peters,Inc.sells a single product and reports the following results from sales of 100,000 units:
$\begin{array}{lr}\text { Sales (\$45/unit)}&\$4,500,000\\\text { Less costs and expenses:}\\\text { Direct materials (\$16/unit) } & \$ 1,600,000 \\\text { Direct labor (\$9/unit) } & 900,000 \\\text { Variable overhead (\$3/unit) } & 300,000 \\\text { Fixed overhead (\$8.10/unit) } & 810,000 \\\text { Variable administrative }(\$ 4.50 / \text { unit) } & 450,000 \\\text { Fixed administrative (\$4/unit) } & 400,000 \\\text { Total costs and expenses } & \underline{\$(4,460,000} )\\\text { Operating income } & \$ 40,000\end{array}$

A foreign company wants to purchase 15,000 units.However,they are willing to pay only $36 per unit for this one-time order.They also agree to pay all freight costs.To fill the order,Peters will incur normal production costs.Total fixed overhead will have to be increased by $60,000 to pay for equipment rentals and insurance.No additional administrative costs (variable or fixed)will be incurred in association with this special order.
Required:
a.Should Peters accept the order if it does not affect regular sales? Explain.
b.Assume that Peters can accept the special order only by giving up 5,000 units of its normal sales.Should Peters accept the special order under these circumstances?

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Definitions:

Growth Strategy

Focuses on growing and expanding the business. It can be pursued internally by opening additional locations or externally through mergers, joint ventures, or the acquisition of other businesses.

Recruiting Efforts

Activities and strategies employed by an organization to attract and hire suitable candidates for job openings.

Workforce

The collective group of individuals engaged in work within an organization or the labor market at large.

Management Consulting

Professional services that advise businesses on how to improve their performance through the analysis of existing organizational problems and the development of improvement plans.