Rothery Co. manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has the capacity to produce 18,000 medals each month; current monthly production is 17,000 medals. The company normally charges $88 per medal. Cost data for the current level of production are shown below:
Variable Costs:
- Direct materials.................. $493,000
- Direct Labor...................... $323,000
- Selling & Administrative....... $30,600
- Fixed Costs:
- Manufacturing.................... $340,000
- Selling & Administrative....... $153,000
- The company has just received a special one-time order for 600 medals at $73 each. For this particular order, no variable selling and administrative costs would be incurred. This order would also have no effect on fixed costs.
- Should the company accept this special order? How much would they make or lose on the order?