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Easton Company has a capacity to produce $75,000$ computer monitors per year. The company is currently producing and selling $58,000$ monitors per year at a selling price of $$450$ per monitor. The cost of producing and selling one monitor at the $58,000$ unit level of activity is given in the table below:

Direct Material cost $ $70$

Direct Labor cost $ $60$

Variable manufacturing cost $ $48$

Fixed manufacturing cost $ $52$

Variable selling and administrative cost $($including sales commission$)$ $ $57$

Fixed selling and administrative cost $ $58$

Total cost per unit $ $345$

The company has received a special order for $12,000$ monitors at a unit price of $$250.$ The company does not have to pay sales commission to the salesmen for the special order. Currently, the company pays a sales commission of $$30$ per monitor to its salesmen. The special order will have no effect on its fixed costs. The marketing manager has rejected the special order based on the following computation:

Special order price $ $250$

Cost per monitor $ $345$

Less: sales commission avoided $ $30$

Cost per monitor for the special order $ $315$

Net loss per monitor for the special order $ $(65)$

Required:

a$)$ You are reviewing the marketing manager's decision. What would you do$?$ Would you accept or reject the order? Show computations to support your decision, especially the impact on company's profits from the special order

b$)$ Regardless of what you answered in part $($a$),$ what is the minimum acceptable price for the special order?

c$)$ Suppose the firm is selling $70,500$ monitors currently. If the company wants to accept the special order, what is the minimum acceptable price? Assume that the cost structure given for an actitivy level of $58,000$ monitors is applicable at this level of activity as well

For the toolbar, press ALT$+$F$10($PC$)$ or ALT$+$FN$+$F$10($Mac$).$

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