ACCT $254$

Special Order Assignment

Groove Music Company produces compact discs of background music for restaurants and other retail shops. Its disc recording machines are capable of producing $50$ discs per hour. The unitrelated cost of producing the discs is $$2\mathrm{.}00.$ The discs sell for $$10\mathrm{.}00$ each. Mood Music Co$.$ has asked the company to produce $10,000$ copies of a disc for $$9\mathrm{.}00.$ Groove Music estimates that for this special order the unit$-$related cost of producing the disc will be $$4\mathrm{.}00$ and that, due to the unique nature of the recording, its machines will only be able to produce $20$ discs per hour. Groove Music has a total of $5,000$ machine hours of capacity. In addition, to accept the special order, Groove Music will have to lease an additional special$-$purpose machine that will cost $$6,500.$

Required:

Assume that existing demand for Groove Music's compact discs is $200,000$ units and that the special order has to be either taken in full or rejected. Prepare an analysis that indicates whether or not the special order should be accepted.