Dapper Dan produces a man's suit that sells for $200. Although the company's production capacity is 3,000 suits per year, only 2,500 suits are currently being produced and sold. At this level of production, the company incurs the following costs:
Easton Clothiers has offered to purchase 500 suits as a one-time special purchase at a price of $135. Required:Prepare a quantitative analysis that indicates whether the special order should be accepted.
What will be an ideal response?
Evaluation of special order:
| Revenue (500 × $135) | $ 67,500 |
| Less special order costs: | ? |
| Unit-level costs ($80 + 40 + 20) × 500 | 70,000 |
| Batch-level costs ($1,200 × 1 batch) | 1,200 |
| Decrease in profit if special order accepted | $ (3,700) |
| Therefore, the special order should not be accepted. | ? |
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