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A Company Is Currently Operating at 70% Capacity Producing 8,000

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Essay

A company is currently operating at 70% capacity producing 8,000 units.Cost information relating to this current production is shown in the following table:
 Per Unit  Sales price $15 Direct material $3.20 Direct labor $7.10 Variable  overhead $0.05 Fixed overhead $0.60\begin{array} { | l | r | } \hline & \text { Per Unit } \\\hline \text { Sales price } & \$ 15 \\\hline \text { Direct material } & \$ 3.20 \\\hline \text { Direct labor } & \$ 7.10 \\\hline \begin{array} { l } \text { Variable } \\\text { overhead }\end{array} & \$ 0.05 \\\hline \text { Fixed overhead } & \$ 0.60 \\\hline\end{array}
The company has been approached by a customer with a request for a special order for 1,500 units.The sales price per unit for this special order is $10.Should the company accept the special order?

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Definitions:

Saving

The portion of income not spent on consumption but kept aside for future use, which may be invested to generate wealth.

Disposable Income

The amount households can devote to saving and spending once income taxes have been factored in.

Savings

The portion of disposable income not spent on consumption of consumer goods but accumulated or invested.

Disposable Income

The financial surplus households hold for spending and saving after income taxes have been applied.

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