The Spartan Company has an annual plant capacity of 25,000 units. Predicted data on sales and costs are given below.
|
Sales (20,000 units @ $50)
|
$1,000,000
|
|
Manufacturing costs:
|
|
|
Variable (materials, labor, and overhead)
|
$40 per unit
|
|
Fixed overhead
|
$30,000
|
|
Selling and administrative expenses:
|
|
|
Variable (sales commission-$1 per unit)
|
$2 per unit
|
|
Fixed
|
$7,000
|
A special order has been received from outside for 4,000 units at a selling price of $45 each.
This order will have no effect on regular sales. The usual sales commission on this order will be reduced by one-half. Should the company accept the order? Show supporting computations.