Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company$$s normal activity level of $88,800$ units per year is:

Direct materials $ $1\mathrm{.}70$

Direct labor $ $4\mathrm{.}00$

Variable manufacturing overhead $ $1\mathrm{.}00$

Fixed manufacturing overhead $ $3\mathrm{.}75$

Variable selling and administrative expenses $ $1\mathrm{.}20$

Fixed selling and administrative expenses $ $3\mathrm{.}00$

The normal selling price is $$20\mathrm{.}00$ per unit. The company$$s capacity is $117,600$ units per year. An order has been received from a mail$-$order house for $2,400$ units at a special price of $$17\mathrm{.}00$ per unit. This order would not affect regular sales or total fixed costs.

Required:

What is the financial advantage $($disadvantage$)$ of accepting the special order?

As a separate matter from the special order, assume the company$$s inventory includes $1,000$ units that are inferior quality. The units must be sold through regular channels at a reduced price. The company does not expect the selling of these inferior units to affect regular sales. What unit cost is relevant for establishing a minimum selling price for the inferior units?

Answer rating: 100% (QA)

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