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A Local Manufacturer Has Been Approached to Supply a Special

Question 60

Multiple Choice

A local manufacturer has been approached to supply a special order for 20 000 mobile phones at a price of $20 per phone.The current cost of producing the phones is made up of direct materials of $8 per phone,direct labour costs of $6 per phone,direct overhead costs of $7 per phone plus fixed overhead costs of $5 each.The company has sufficient spare capacity to manufacture the order without affecting its normal production.Should they accept the order?


A) yes
B) no
C) yes,as long as there are no adverse long-term effects of accepting the order that outweigh the short-term benefits
D) yes as long as the customer pays for the order in cash

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