Marsdon Company has an annual production capacity of 15,000 units. The costs associated with production and sale of the company's product are given below:
$\begin{array}{lr}\text { Manufacturing costs: }\
\text { Variable } & \$ 12 \text { per unit } \
\text { Fixed (annual cost) } & \$ 90,000 \
\text { Selling and administrative costs: } & \
\text { Variable (sales commissions) } & \$ 3 \text { per unit } \
\text { Fixed (annual cost) } & \$ 60,000
\end{array}$ The company presently is selling 12,000 units annually at a selling price of $28 each. A special order has been received from a distributor who wants to purchase 3,000 units at a special price of $20 each. Regular sales would not be affected by this order and the order could be filled without any impact on total fixed costs. Sales commissions on the special order would be reduced by one-third.
Required:
Determine whether the company should accept the special order.

Question

Marsdon Company has an annual production capacity of 15,000 units. The costs associated with production and sale of the company's product are given below:
 $\begin{array}{lr}\text { Manufacturing costs: }\
\text { Variable } & \$ 12 \text { per unit } \
\text { Fixed (annual cost) } & \$ 90,000 \
\text { Selling and administrative costs: } & \
\text { Variable (sales commissions) } & \$ 3 \text { per unit } \
\text { Fixed (annual cost) } & \$ 60,000
\end{array}$ The company presently is selling 12,000 units annually at a selling price of $28 each. A special order has been received from a distributor who wants to purchase 3,000 units at a special price of $20 each. Regular sales would not be affected by this order and the order could be filled without any impact on total fixed costs. Sales commissions on the special order would be reduced by one-third.
Required:
Determine whether the company should accept the special order.

Quizplus · Accepted Answer

The Answer of Marsdon Company has an annual production capacity of 15,000 units. The costs associated with production and sale of the company's product are given below:
 $\begin{array}{lr}\text { Manufacturing costs: }\
\text { Variable } & \$ 12 \text { per unit } \
\text { Fixed (annual cost) } & \$ 90,000 \
\text { Selling and administrative costs: } & \
\text { Variable (sales commissions) } & \$ 3 \text { per unit } \
\text { Fixed (annual cost) } & \$ 60,000
\end{array}$ The company presently is selling 12,000 units annually at a selling price of $28 each. A special order has been received from a distributor who wants to purchase 3,000 units at a special price of $20 each. Regular sales would not be affected by this order and the order could be filled without any impact on total fixed costs. Sales commissions on the special order would be reduced by one-third.
Required:
Determine whether the company should accept the special order.

Marsdon Company Has an Annual Production Capacity of 15,000 Units