Mission Electronics manufactures and sells basic DVD players under various generic store

brand names. The cost of one of their models follows:

Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18.00

Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.00

Variable overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.00

Fixed overhead ($2,700,000 per year; 450,000 units per year) . . 6.00

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $41.00

Pacifi c Cash & Carry, a chain of low-price electronic sales and rental outlets, has asked Mission to supply them with 30,000 players for a special promotion Pacifi c is planning. Pacifi c has

offered to pay Mission a unit price of $42 per DVD player. The regular selling price is $60.

The special order would require some modifi cation to the basic model. These modifi cations

would add $4.00 per unit in material cost, $1.50 per unit in labor cost, and $0.50 in variable

overhead cost. Although Mission has the capacity to produce the 30,000 units without affecting its regular production of 450,000 units, a one-time rental of special testing equipment to

meet Pacifi cs requirements would be needed. The equipment rental would be $45,000 and

would allow Mission to test up to 50,000 units.

Required

a. Prepare a schedule to show the impact of fi lling the Pacifi c order on Missions profi ts for

the year.

b. Would you recommend that Mission accept the order?

c. Considering only profi t, what is the minimum quantity of DVD players in the special

order that would make it profi table?