Hillside Company has an annual plant capacity of 3,000 units. Data concerning this product are given below:
Annual sales at regular selling prices............ 2,500 units
Manufacturing costs:
Variable............................................... $20 per unit
Fixed (annual)....................................... $75,000
Selling and administrative expenses:
Variable (sales commissions)................... $6 per unit
Fixed (annual)....................................... $15,000
The company has received a special order for 500 units at a selling price of $45 each. Regular sales would not be affected, and sales commissions on the 500 units would be reduced by one-third. This special order would have no impact on total fixed costs.
Required:
Determine whether the company should accept the special order. Show all computations.