Adamyan Co

question 51

Essay

Adamyan Co.manufactures and sells medals for winners of athletic and other events.Its manufacturing plant has the capacity to produce 15,000 medals each month;current monthly production is 12,750 medals.The company normally charges $120 per medal.Cost data for the current level of production are shown below:
The company has just received a special one-time order for 700 medals at $83 each.For this particular order,no variable selling and administrative costs would be incurred.This order would also have no effect on fixed costs.
Required:
Should the company accept this special order? Why?

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Definitions:

Market Interest Rate

The prevailing rate of interest available in the marketplace for securities of similar risk and maturity.

Annual Payments

Payments that are due once per year, commonly used in the context of loans, leases, or other financial agreements.

Compounded Annually

Refers to the process of calculating and adding interest to the principal amount of an investment or loan once per year.

Incremental Borrowing Rate

The interest rate a lessee would have to pay to borrow funds over a similar term, and with a similar security, to lease a comparable asset.