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Special Order Plant Capacity Calculations

Hillside Company has an annual plant capacity of 3,000 units. Data concerning this product are given below:

Annual sales at regular selling prices............ 2,500 units
Manufacturing costs:
Variable............................................... $20 per unit
Fixed (annual)....................................... $75,000
Selling and administrative expenses:
Variable (sales commissions)................... $6 per unit
Fixed (annual)....................................... $15,000

The company has received a special order for 500 units at a selling price of $45 each. Regular sales would not be affected, and sales commissions on the 500 units would be reduced by one-third. This special order would have no impact on total fixed costs.

Required:
Determine whether the company should accept the special order. Show all computations.

Solution Preview

Since the sales of additional units will have no impact on the fixed costs, we should not consider them in the ...

Solution Summary

Whether the company should accept a special order.

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