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Issa Company: Should the company accept of reject the specia

Issa Company manufactures a personal computer designed for use in schools and markets it under its own label. Issa has the capacity to produce 25,000 units a year but is currently producing and selling only 15,000 units a year. The computerââ?¬â?¢s normal selling price is $1,600 per unit with no volume discounts. The unit-level costs of the computerââ?¬â?¢s production are $600 for direct materials, $300 for direct labor, and $120 for indirect unit-level manufacturing costs. The total product- and facility-level costs incurred by Issa during the year are expected to be $2,100,000 and $800,000, respectively. Assume that Issa receives a special order to produce and sell 3,000 computers at $1,200 each.

Required:

Should Issa accept or reject the special order? Support your answer with the appropriate computations.

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Solution Preview

See attached Excel file for calculations.

Yes, Issa should accept the order because the profit per unit of $180 will ...

Solution Summary

Your tutorial shows you the criteria for accepting special decisions and then computes the incremental profits for the order

$2.19