Question

A company has the capacity to produce 20,000 units of its product per year. It is...

A company has the capacity to produce 20,000 units of its product per year. It is currently only producing 13,000 units per year, with a sell price of $70 per unit. A customer has placed a special order for 6,500 units at $62 per unit. The incremental cost of accepting the special order is $382,000.

Should the company accept the special order?

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Answer #1

Answer-----------Yes, The company should accept the special order

Working

financial advantage (disadvantage) of accepting the special order
Additional Revenue from offer (6500 x $62) $      403,000.00
Less: Total Additional cost due to acceptance of offer $      382,000.00
Financial Advantage $        21,000.00

The order will increase overall net income hence order should be accepted.

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