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The company wants to increase its profitability and is consequently reviewing its products and considering other options to expand it operations. To this end, it has received a request to supply one of its products to a foreign supplier as a means of entering a new market. Additionally, the company is reviewing its product mix to see which ones should be retained or discarded. You are asked to assist in this process.

D 1) Special Order The company manufactures cappuccino makers. For the first eight months of 2021, the company reported the following operating results while operating at 80% of plant capacity: Sales (500,000 units) $90,000,000 Cost of goods sold 54,000,000 Gross profit 36,000,000 Operating expenses 24,000,000 Net income $12,000,000 An analysis of costs and expenses reveals that variable cost of goods sold is $95 per unit and variable operating expenses are $35 per unit. In September, Carney Company receives a special order for 40,000 machines at $135 each from a major coffee shop franchise. Acceptance of the order would result in $10,000 of shipping costs but no increase in fixed expenses. You are required to :

(a) Prepare an incremental analysis for the special order. 8 Marks

(b) Should the company accept the special order? Justify your answer. 2 Marks

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