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 net income would increase by $2,000.
B) No, because net income would decrease by $1,500.
C) No, because net income would decrease by $2,000.
D) Yes, because net income would increase by $7,500.
E) No, because net income would decrease by $5,500.

Correct Answer:

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