Tyco is a printing company, well known for its high-quality colour brochures. Ellie has owned and managed the company since its inception, and production at the facility is running at close to full capacity - 150,000 brochures a month.

Tyco had one sales representative and one printing press operator. Temporary labor was frequently used to help in the printing process if volume expanded unexpectedly. Many of the costs were fixed, but some costs certainly varied with the number of brochures printed and sold.

The following is a summary of typical monthly costs to produce 150,000 brochures.

Manufacturing costs:

Direct material, variable $ 6,000

Direct labor, variable 1,500

Direct labor, fixed 3,000

Manufacturing overhead, variable 1,500

Manufacturing overhead, fixed 3,375

Total manufacturing costs $15,375

Nonmanufacturing costs:

Sales, variable $ 1,500

Sales, fixed 1,875

Corporate, fixed 3,750

Total nonmanufacturing costs $ 7,125

Total costs $22,500

Printing services are priced at an average of $17 per 100 brochures printed. Occasionally special situations arose, but monthly production was very typical on a regular basis. Special situations, or special orders were not all handled the same way.

Ellie had been presented with a special order for next month from a local company. 25,000 brochures were needed to advertise a new product at three trade shows. The company honestly told Ellie that the usual price of $17 per 100 brochures would be too much money for them at this time and they could not go any higher than $10 per 100 brochures. If Ellie could not do it they would be forced to search elsewhere for the services. Ellie did not want to disappoint a local company.

 Required

Should Ellie accept the special order at $10 per 100 brochures? She realized that this order would be not have to pay the sales representative the typical sales commission of $1 per 100 brochures. She also knew that taking this order would not affect any of her current business. Provide quantitative support for your answer as well as any subjective perspectives you considered in your decision.

explain your answers both from a quantitative, numerical analysis and from a local business perspective, with subjective considerations.

Answer rating: 100% (QA)

SOLUTION To determine if Tyco should accept the special order for 25000 brochures at 10 per 100 broc... View the full answer