M Company operates a factory that is currently operating at 50% capacity. It is on track to make 40,000 units this year, but recently received a special order to make and sell 20,000 units for a selling price per unit of $9. There will be no marketing costs on this special order. Current costs at the 40,000-unit level as well as proposed costs at the 60,000-unit level are as follows:

40,000 units 60,000 units Direct Materials Cost $80,000 $120,000 Direct Labor Cost 120,000 180,000 Factory Overhead (fixed and variable) 240,000 300,000 Total Manufacturing Costs $440,000 $600,000 Cost Per Unit $11 $10

From the information provided, present the detailed dollar amounts of relevant costs to consider in making this decision, including the total amount of change in company income or loss (please label) the company would incur if it accepted this special order. (b) Then explain whether the Special Order should be accepted or not. (c) Then explain why you are recommending the Special Order be accepted or not.

Answer rating: 100% (QA)

To analyze whether M Company should accept the special order lets break down the relevant costs and ... View the full answer