QUESTION #1 (16 marks (29 mins) The Amazon Company makes a single product called a Kindle. The company has the capacity to produce 40,000 LANS per year. Using Absorption costing, per-unit costs to produce one Kindle at a 40,000-activity level follow: b) Should Amazon accept the Special Order from Apple Company? Why? (2 marks) Direct Materials $20 Direct Labour $10 Variable Manufacturing Overhead $ 5 Fixed Manufacturing Overhead* $ 7 Variable Selling Expense $8 Fixed Selling Expense* $ 2 * Based on 40,000 units produced The regular selling price for one LAN is $60. c) Fox Company, also has 2,000 LANS that are slightly defective. They have been unable to sell them through regular channels at 50% off the regular selling price. What is the lowest selling price they should be willing to accept to sell the 2,000 defective LANS? Explain why your answer is correct. (2 marks) Required: A Special Order received at Amazon from the Apple Company to purchase 8.000 LANS next year at 15% off the regular selling price. If this Special Order is accepted, the variable selling expense will reduce by 25%. However, Amazon would have to purchase a specialized machine to engrave the Apple name on each Kindle in the Special Order. This machine would cost $12,000, and Amazon would have no use for it after the Special Order. The total fixed costs, both manufacturing and selling, are constant within the relevant range of 30,000 to 40.000 Kindle per year. Required: a) What would the impact be on Amazon's Net Income (ignore taxes) of accepting the Special Order? (SHOW YOUR WORK.) (4 marks)