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Jax Co. manufactures a product called Lockdown. They currently manufacture 100,000 units per year and...

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Accounting

Jax Co. manufactures a product called Lockdown. They currently manufacture 100,000 units per year and the normal sales price is $50 per unit. The manufacturing facility is currently operating at 80% of capacity so they could manufacture up to 125,000 units before having to spend more capital on additional equipment. The variable cost for each unit is $20. The total fixed cost is $100,000 or $1 per unit.

Jax Co. is contacted by Home depot, who offers to purchase 10,000 units at $25 per unit. If Jax accepts the offer, their normal sales would not be affected.

Should Jax accept this special order?

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