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statonglenda
statonglenda
05.05.2020 • 
Business

Thompson stime masters produced and sold 30,000 alarm clocks last year. Thompson's profit report follows:

sales (30,000 units) $600,000
less:
direct materials 210,000
direct labor 150,000
unit-related overhead 90,000
selling costs 30,000
contribution margin $120,000
less:
batch-related costs 12,000
product-sustaining 10,000
facility-sustaining costs 94,000
profit $4,000 this year

Thompson again expects to sell 30,000 alarm clocks through normal channels. in addition, a hotel management company wants to place an order for 5,000 clocks for a new hotel being built; however, the company wants a 20 percent discount on the normal selling price. the selling cost per unit will not be incurred on this order because no commission will be paid. one additional production run will be required at a cost of $2,000. product sustaining costs will not be incurred. Thompson has the capacity to produce the additional 5,000 clocks.

should Thompson accept or reject the special order?

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