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$1.$Paulo Alexandrio Ltd PA makes numerous lines of men's and women's sleepwear. Senior management has recently been approached by a large department store group to make a special order of children's sleepwear with a movie character theme on the fabric. PA is currently working at $70\%$ of full capacity. The Head of Marketing has estimated the figures for the special order of $5,000$ requested by the department store group. He has followed the company policy of full pricing which includes an allocation of selling and administration expenses plus a $15\%$ markup. Other information includes: a$.$ Fixed Manufacturing Overhead is normally applied at $80\%$ of direct labour dollars. The annual fixed overhead budget is $$400,000$ based on $100,000$ products at full capacity. b$.$ A franchise fee would have to be paid to the movie company to use their name and characters. c$.$ Total selling and administration costs are estimated as $$100,000$ for the current year. These costs are believed to be a function of the total product capacity, therefore, selling and admin costs are applied on products produced. d$.$ At full capacity, PA could choose to outsource the printing, and reduce direct labour on the Special Order by $50\%.$ The franchise fee would then be paid by the external printer. The cost of outsourcing is quoted as $$6$ per product. If the department store offered $$80,000$ for the $5,000$ extra products, should PA accept the order when it is working at $70\%$ capacity, i$.$e$.70,000$ products? Show your workings in full. $2.$ How would your answer change if at all, if PA is currently operating at full capacity with confirmed sales for all products? Show your workings in full. $3.$ a$.$ At full capacity, what if PA outsourced the printing, and reduced direct labour on the Special Order by $50\%?$ The franchise fee would then be paid by the printer. The cost of outsourcing is quoted as $$6$ per unit. Is this beneficial to the company? Show your workings in full.

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