Special Order Decision SE5 Hadley Company has received a spe

Special Order Decision SE5. Hadley Company has received a special order request for Product R3P at a selling price of $20 per unit. This order is over and above normal production, and budgcted production and sales targets for the year have alrcady been exceeded. Capacity exists to satisfy the special order. No selling costs will be incurred in connection with this order. Unit costs to manufacture and sell Product R3P are as follows: direct materials, $7.60; direct labor, S3.75; variable overhcad, $9.25; fixed overhcad, $4.85; variable selling costs, $2.75; and fixed gencral and administrative costs, S6.75. Should Hadley accept the order?

Solution

Incremental income(loss) per unit = 20-7.6-3.75-9.25= -0.6 No the order should not be accepted