on capacity of 10,000 system units and currently only produces 8,000. The company is operating above its tie point. The sale price per system is $500.00 and the related costs are presented later. Required: Indicate whether this business should accept or reject a special order of 500 microchips at a price of $300. The client is the Humane Society and it is an order that will not be repeated in the future as this comes from non-recurring funds. When we learned that the Humane Society was seeking bids, we took it upon ourselves to send our sales specialists who brought a proposal prepared following the usual sales and marketing practices. Despite being a special order, if accepted, it will follow the typical pattern of routine orders in terms of transaction costs. This order has no effect
The PUPPY SAFETY Corp. is dedicated to the wholesale of microfiche systems to detect the location of lost pets. The company has a production capacity of 10,000 system units and currently only produces 8,000. The company is operating above its tie point. The sale price per system is $500.00 and the related costs are presented later.
Required: Indicate whether this business should accept or reject a special order of 500 microchips at a price of $300. The client is the Humane Society and it is an order that will not be repeated in the future as this comes from non-recurring funds. When we learned that the Humane Society was seeking bids, we took it upon ourselves to send our sales specialists who brought a proposal prepared following the usual sales and
| $300/per unit | |
| Marketing and sales costs | $125/ per unit |
*Note: In the above mentioned costs, $100 are variable manufacturing costs and $50 are marketing and sales variable costs
Should PUPPY SAFETY accept or reject the special order?
a. You must accept the special order to get a $150 unit margin contribution
b. You should not accept the special order because although it says that the transaction has no effect on routine sales, it is possible that social networks disclose the sale at that discounted price.
c. You must accept the special order to get a $200 unit margin contribution
d. You should not accept the special order because it represents a loss
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