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Sherene Nili manages a company that produces wedding gowns. She produces both a custom product that is made to order and a standard product that is sold in bridal salons. Her accountant prepared the following forecasted income statement for March, which is a busy month:

Number of Dresses

Custom dresses - 10

Standard dresses - 20

Total - 30

Sales Revenue

Custom Dresses - $46,500

Standard Dresses - $26,500

Total - $73,000

Materials

Custom Dresses - $9300

Standards Dresses - $7300

Total - $16600

Labor

Custom Dresses - $19300

Standard Dresses - $8300

Total - $27600

Machine Depreciation

Custom Dresses - $530

Standard Dresses - $230

Total - $760

Rent

Custom Dresses - $3500

Standard Dresses - $2100

Total - $5600

Heat & Light

Custom Dresses - $1200

Standard Dresses - $800

Total - $2000

Other Production costs Total - $2100

Marketing & Administration total - $7000

Total Cost - $61660

Operating profit - $11340

Ms. Nili already has orders for the 10 custom dresses reflected in the March forecasted income statement. The depreciation charges are for machines used in the respective product lines. Machines depreciate at the rate of $1 per hour based on hours used, so these are variable costs. In March, cutting and sewing machines are expected to operate for 760 hours, of which 530 hours will be used to make custom dresses. The rent is for the building space, which has been leased for several years at $5,600 per month. The rent, heat, and light are allocated to the product lines based on the amount of floor space occupied.

A valued customer, who is a wedding consultant, has asked Ms. Nili for a special favor. This customer has a client who wants to get married in early April. Ms. Nili's company is working at capacity and would have to give up some other business to make this dress. She can't renege on custom orders already agreed to, but she can reduce the number of standard dresses produced in March to 10. Ms. Nili would lose permanently the opportunity to make up the lost production of standard dresses because she has no unused capacity for the foreseeable future. The customer is willing to pay $22,300 for the special order. Materials and labor for the order will cost $5,300 and $9,300, respectively. The special order would require 105 hours of machine time. Ms. Nili's company would save 115 hours of machine time from the standard dress business given up. Rent, heat and light, and other production costs would not be affected by the special order.

Required:

a-1.Calculate the differential operating profit (loss).

a-2.From an operating profit (loss) perspective for March, should Ms. Nili accept the order?

b.What is the minimum price Ms. Nili should accept to take the special order?

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