The Shoop Corporation produces and sells a part used in the production of tractors. The unit costs associated with this part are as follows:
Jupiter Company has approached Shoop Corporation with an offer to purchase 20,000 units of this part at a price of $.72. Accepting this special sales order will put idle manufacturing capacity to use and will not affect regular sales. Total fixed costs will not change.
Determine whether or not the special order should be accepted. Justify your conclusion.
Definitions:
Produced Units
The total number of units manufactured within a specific period.
Direct Manufacturing Cost
The total of direct materials and direct labor costs that are tied directly to the production process of a product.
Produced Units
The aggregate quantity of units produced over a defined time frame.
Relevant Range
The scope of business activity levels for which certain cost assumptions and behaviors remain valid.
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