Chapter 10, Problem 3PA

Marcotti Cupcakes bakes and sells a basic cupcake for $1.25. The cost of producing 600,000 cupcakes in the prior year was:

At the start of the current year, Marcotti received a special order for 15,000 cupcakes to be sold for $1.10 per cupcake. To complete the order, the company must incur an additional $700 in total fixed costs to lease a special machine that will stamp the cupcakes with the customer’s logo. This order will not affect any of Marcotti’s other operations and it has excess capacity to fulfill the contract. Should the company accept the special order? (Show your work.)