Chisel Inc currently produces 30,000 hammers per year with variable costs of $90,000 and fixed costs of $40,000 per year. The hammers sell for $5 per unit. Currently, the company has no excess capacity as it is able to sell all of the hammers it produces. Jacob Maccabi, head salesman received a special order for an additional 5,000 units at the same price. Producing the extra units will require the company to rent an additional machine for increased capacity. The cost of the increased machine is $12,500. Should the company accept the special order - explain your answer.

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The Answer of Chisel Inc currently produces 30,000 hammers per year with variable costs of $90,000 and fixed costs of $40,000 per year. The hammers sell for $5 per unit. Currently, the company has no excess capacity as it is able to sell all of the hammers it produces. Jacob Maccabi, head salesman received a special order for an additional 5,000 units at the same price. Producing the extra units will require the company to rent an additional machine for increased capacity. The cost of the increased machine is $12,500. Should the company accept the special order - explain your answer.

Chisel Inc Currently Produces 30,000 Hammers Per Year with Variable