Accounting

Due in 6 hours

Assume that a company with 200,000 unit capacity is currently producing and selling only 180,000 units of product each year at a regular price of $4.  If the variable cost per unit is $2 and the annual fixed cost is $180,000, the income statement looks like:

		Per Unit
Sales (180,000 units)	$720,000	$4.00
Less: Variable cost (180,000 units)	$360,000	$2.00
Contribution Margin	$360,000	$2.00
Fixed Cost	$180,000	$1.00
Net Income	$180,000	$1.00

  The company has just received an order that calls for 20,000 units @ $2.20, for a total of $44,000.  The acceptance of this order will not affect regular sales.  Should the company accept this offer?  Explain by using the cost data provided.

Would your answer be different if the special order was for 23,000 units.

Write answer of 2 pages.