Carter Naumann is the owner of a Champion Chips Pty Ltd, which produces communication chips for mobile phones. The company has two production lines, one for a standard communication chip that is also produced by several competitors and one for custom communication chips built to customer specifications. Financial results of the company for the previous year are as shown below.

The building has been leased for 10 years at \($22\) 000 per year. The rent, electricity, and other fixed manufacturing costs are allocated based on the amount of floor space occupied by each production line. Depreciation is specifically allocated to the machines used on each line.
Carter recently received an order from one of his best customers to produce 5000 custom-built communication chips and is trying to decide whether he should accept the order. His company is currently working at full capacity and is required by contract to produce all specialty orders already received. He could reduce the production of standard chips by a third for the next year to accept the new special order. The customer has offered to pay \($24.00\) per chip with the new order. The direct costs will be \($16\) per chip, and Carter will have to buy a new tool costing \($20\) 000 to produce the custom-built chips. The tool will be scrapped when this order has been delivered.
Required

(a) Should Carter accept the order? In your answer, identify the unavoidable costs, differential revenues and costs, and opportunity costs.

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Sales Direct materials Direct labour Rent Depreciation Electricity Other fixed manufacturing costs Profit Custom Standard chips chips $150000 24 600 48 000 12 400 15 100 1800 4400 $110000 28800 32 500 3600 10500 Total $260000 53 400 80500 16000 25600 450 2250 1080 5480 76930 183 230 106 300 $ 43700 $ 33070 $ 76770