In a month, Al Zahra company normally produces and sells 10000 units. The selling price per unit is $25 and there is excess capacity to produce an additional unit of 5000. The variable manufacturing cost per unit is $15. Total fixed manufacturing costs are $50,000. Variable operating cost is $5 per unit and fixed operating costs total $20,000.
A customer placed a special order for 2000 units for $20 each. The customer is willing to shoulder the delivery costs; hence the business will NOT incur additional variable operating costs of $5.
a) Should the company accept or reject the special order? Justify your answer.
b) What if the order was for 3000 units at a selling price of $14?

You are required to answer the following questions 80 words under each section given below:
I) Introduction
a) Explain generally about situations where managers “accept/reject” special sales orders.
II) Discussion

a) Answer to the question here
III) Reviews
-write in your own words-
IV) Conclusion
V) -write in your own words-
VI) Bibliography/References

Answer rating: 100% (QA)

Answers a INTRODUCTION Generally manager will accept the special order where selling price exceed th... View the full answer