Palmer Company manufactures and sells trophies for winners of athletic events. The company normally charges $60 per trophy. The average costs for a trophy is shown below.
Direct materials $22
Direct labor 12
Variable manufacturing overhead 8
Variable marketing expenses 4
Fixed manufacturing overhead 16 ($2,000,000 fixed manufacturing overhead/125,000 trophies)
Total costs $62
Palmer Company has enough idle capacity to accept a one-time only special order for 10,000 trophies at $50 per trophy. Palmer Company will not incur any variable marketing expenses for this order and no additional fixed costs.
Required
Should the company accept this special order? Please state your decision and provide numerical support for your decision.
ScholarMatic: Explanation & Answer
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