Norton Company has received an unusually large order from a potential new customer. The customer wants to purchase 1,000 units of Nortons widget product at a price of $575 per unit. Normally, the company sells no more than a few hundred units to a single customer for a single order.

Nortons normal selling price is $1,100 per unit to its regular customers.

Below is Nortons unit costs analysis, based on producing 6,000 units:

Direct materials	$160
Direct labor	80
Manufacturing overhead (40% variable)	240
Selling expenses (60% variable)	80
Administrative expenses (10% variable)	40
Total per unit	$600

The companys production capacity is sufficient to produce 7,000 units during the production period. Additionally, no additional selling expenses would be incurred on the special order.

a. Ignoring the special order, determine Nortons profit on production and sales of 6,000 units, ignoring income taxes.

b. Should Norton accept the special order if its goal is to maximize short-run profits? Determine the impact on profit of accepting the order.

c. Determine the minimum price Norton would want, to increase before tax profits by $160,000 on the special order.

d. When making a special-order decision, what non-quantitative aspects of the decision should Norton consider?

Answer rating: 100% (QA)

a Without the special order Nortons profit on producing and selling 6000 units without considering income taxes is Profit per Unit ignoring income taxes Normal Selling Price Total Per Unit Cost Profit ... View the full answer