Miko Company manufactures a personal computer designed for use in schools and markets it under its own label. Miko has the capacity to produce 40,000 units a year but is currently producing and selling only 32,000 units a year. The computer’s normal selling price is $600 per unit with no volume discounts. The unit-level costs of the computer’s production are $200 for direct materials, $180 for direct labor, and $50 for indirect unit-level manufacturing costs. The total product-and facility-level costs incurred by Miko during the year are expected to be $1,600,000 and $400,000, respectively. Assume that Miko receives a special order to produce and sell 6,000 computers at $450 each.

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

  • CreatedFebruary 07, 2014
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