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Deciding to Take a Special Order

Biello Co. manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has the capacity to produce 15,000 medals each month; current monthly production is 14,250 medals. The company normally charges $115 per medal. Cost data for the current level of production are shown below.

Variable Costs
Direct Materials $969,000
Direct Labor $270,750
Selling and Administrative $270,075
Fixed Costs
Manufacturing $370,550
Selling and Administrative $89,775

The company has just received a special one-time order for 600 medals at $102 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? Why?

Solution Preview

The plant's total manufacturing capacity is 15,000 units per month, out of which only 14250 is being currently utilized. Hence, the one time order of 600 medals can be easily produced with the ...

Solution Summary

The solution explains in 129 words with the relevant calculations explain whether the company should do 600 medals at $102 each given certain variable and administrative costs.