Minor Electric Has Received a Special One-Time Order for 1,500

Minor Electric has received a special one-time order for 1,500 light fixtures (units) at $5 per unit. Minor currently produces and sells 7,500 units at $6.00 each. This level represents 75% of its capacity. Production costs for these units are $4.50 per unit, which includes $3.00 variable cost and $1.50 fixed cost. To produce the special order, a new machine needs to be purchased at a cost of
$1,000 with a zero salvage value. Management expects no other changes in costs as a result of the additional production. Should the company accept the special order?

A) Yes, because incremental revenue exceeds incremental costs.
B) Yes, because incremental costs exceed incremental revenues.
C) No, because the incremental revenue is too low.
D) No, because incremental costs exceed incremental revenue.
E) No, because additional production would exceed capacity.

Correct Answer:

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Access For Free