Question

Mason Textile Company manufactures high-quality bed sheets and sells them in sets to a well-known retail company for $64 a set. Mason has sufficient capacity to produce 150,000 sets of sheets annually; the retail company currently purchases 100,000 sets each year. Mason’s unit-level cost is $36 per set and its fixed cost is $840,000 per year. A motel chain has offered to purchase 15,000 sheet sets from Mason for $45 per set. If Mason accepts the order, the contract will prohibit the motel chain from reselling the bed sheets.

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



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  • CreatedFebruary 07, 2014
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