The Mayfair Company manufactures a single product. The cost of producing and selling a single unit of this product at the company's normal operating level of 98,400 units per year:

Direct materials	$	1.60
direct labor	$	2.00
Variable production load	$	0.90
Fixed production load	$	4.55
Variable selling and administrative expenses	$	1.30
Fixed selling and administrative expenses	$	1.00

The regular selling price is $19.00 per unit. The company's capacity is 123,600 units per year. Received an order for 2,100 units at a special price of $16.00 per unit from a mail-order house. This order does not affect regular sales or the company's total fixed costs.

Necessary:

1. What is the financial advantage (disadvantage) of accepting a custom order?

2. Apart from the special order, let's assume that the company has 1,000 units of this product manufactured last year, which is less than the current model. Units must be sold at discounted prices through regular channels. What unit cost is appropriate to set a minimum selling price for these units?

Answer rating: 100% (QA)

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