Assume that a Campbell’s soup plant is running at 90% of its monthly capacity. Campbell’s has just received a special order to produce 40,000 cases of chicken noodle soup for a national supermarket. The supermarket will sell the soup under its own private brand label.

The soup will be the same in all respects, except for the label, which will cost Campbell’s an extra \($5,000\) in total to design. The supermarket has offered to pay only \($19.00\) per case, which is well under Campbell’s normal sales price.

Costs at the current production level (450,000 cases) are as follows:

1. Is there enough excess capacity to fill this order?
2. Will Campbell’s operating income increase or decrease if it accepts this special order?
By how much?

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Direct Materials Direct Labor Total Cost $4,500,000 1,350,000 Cost per Case (450,000 cases) $10.00 3.00 Variable MOH 900,000 2.00 Fixed MOH 2,700,000 6.00 Total $9,450,000 $21.00