Question: Albertine Co. manufactures and sells trophies for winners of athletic and other events. Its manufacturing plant has the capacity to produce 16,000 trophies each month; current monthly production is 12,800 trophies. The company normally charges $110 per trophy. Cost data for the current level of production are shown below:
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Variable costs:
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Direct materials
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$614,400
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Direct labor
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$256,000
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Selling and administrative
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$35,840
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Fixed costs:
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Manufacturing
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$294,400
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Selling and administrative
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$94,720
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The company has just received a special one-time order for 1,200 trophies at $58 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: (please show all work as to why you come to your conclusion)
Should the company accept this special order? Why?