Snapper Tool Company has a production capacity of 3,000 units per month, but current production is only 2,500 units.Total manufacturing costs are $60 per unit and marketing costs are $16 per unit.Doug Levy offers to purchase 500 units at $76 each for the next five months.Should Snapper accept the one-time-only special order if only absorption-costing data are available?
A)Yes, good customer relations are essential.
B)No, the company will only break even.
C)No, since only the employees will benefit.
D)Yes, since operating profits will most likely increase.
E)Yes, because breaking even is better than having idle capacity.

Question

Quizplus · Accepted Answer

The special order price of $76 per unit exceeds the total manufacturing cost of $60 per unit, leading to an increase in operating profits. Marketing costs are not relevant for this special order.

Snapper Tool Company Has a Production Capacity of 3,000 Units