eague Plumbing has received a special one-time order for 1,500 toilets (units) a

Question

eague Plumbing has received a special one-time order for 1,500 toilets (units) at $75 per unit. Teague currently produces and sells 7,500 units at $100.00 each. This level represents 75% of its capacity. Production costs for these units are $75.00 per unit, which includes $70 variable cost and $5 fixed cost. To produce the special order, shipping costs of $10,000 will be incurred. Management expects no other changes in costs as a result of the additional production. Should the company accept the special order?

Explanation / Answer

No, because incremental costs exceed incremental revenue.

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