Phones-R-US sells phones and has the option to complete a special order sale The order was received for an additional 10,000 units. Currently, sales total 80,000 units per year with an annual capacity of 100,000. Details on the regular transactions and the special order is included below: 

Regular transactions per unit: 

Selling price $ 80.00 Direct Materials $ 23.30 Direct Labour $ 16.80 Variable Manufacturing Overhead $ 7.40 Fixed Manufacturing Overhead $ 5.00 Fixed Selling $ 9.00 Sales Commission $ 1.80 Variable Admin $ 2.75 Fixed Admin $ 2.00 Fixed costs are assumed to be unchanged as long as the total activity does not exceed annual capacity. Sales commissions are assumed to be applicable to each and every sale. The special order is for $58 per unit and should not affect regular sales.

What is the impact on the profits of Phones-R-US and should they accept the offer?  

What is the lowest price that Phones-R-US should sell for in a special order? 

What is the impact on the profits of Phones-R-US if it loses 2,000 normal sales from taking the special order, should they accept it in this case?

Answer rating: 100% (QA)

Special order Per Unit Total Sales 10000 x 58 5800 580000 Less Variable costs Direct mat... View the full answer