Chapter 11, Problem 9E

Special Order Decision
Delta Company produces a single product. The cost of producing and selling unit of this product at company’s normal activity level of 60,000 units per year is:

The normal selling price is $21 per unit. The company’s capacity is 75,000 units per year. An order has been received from a mail-order house for 15,000 units at a special price of $14,00 per unit. This order would not affect regular sales or the company’s total costs.
Required:

1. What is the financial advantage (disadvantage) of accepting the special order?
2. A s a separate matter from the special order, assume the company’s inventory includes 1,000 units of this product that were produced last year and that are inferior to the current model. The units cost is relevant for establishing a minimum selling price for these units? Explain.