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Kirby Company manufactures leather briefcases sold to wholesalers for $37.95. The plant...

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Accounting

Kirby Company manufactures leather briefcases sold to wholesalers for $37.95.
The plant capacity for manufacturing this product is 750,000 units annually, but normal volume is 500,000 units. The unit and the total costs at normal volu 6-42 Special order decision Kirby Company manufactures leather briefcases sold
to wholesalers for $37.95. The plant capacity for manufacturing this product
is 750,000 units annually, but normal volume is 500,000 units. The unit and
total costs at normal volume follow:
Manufacturing support and selling and administrative costs include both
variable and fixed costs; fixed manufacturing support costs for the current
year are budgeted at $4,500,000, and fixed selling and administrative costs
are $2,100,000.
The company has been approached by a prospective customer who has
offered to purchase 100,000 briefcases at $25 each. The customer wants the
product packaged in large cartons rather than the normal individual
containers and will pick them up in its own trucks. Accordingly, the variab
selling and administrative costs will be lower by 60% for this order.
Required
Determine whether Kirby Company should accept this special order.me follow:
image

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