Holiday Decorations Unique has been approached by the community college to make special decorations for the faculty and staff. The college is willing to buy 5,000 Christmas ornaments with their own design for $6 a piece. The company normally sells its decorations for $12.00 each. A break down of their costs is as follows:

Direct Materials: $2.00
Direct Labor: .50
Variable Costs: .50
Fixed Costs: 1.50
Total Cost Per Unit: $4.50

And what do YOU think ?

No

Why ?

Actually, Yes because the manufacturing cost per unit of $4.50 is lower than the special offer sales price per unit of $6.

What was the question?

Should Holiday Decorations Unique accept the special order made by the college?

Well what is your answer?

You are suppose to help me out, not ask me a question right back

It's against the TOS of this site to do your homework for you.

Quote:

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Originally Posted by PhillySportsFan

you are suppose to help me out, not ask me a question right back

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I will help hen you explain what your problem is. I will not do your work for you

All right then explain the problem to me.

It is a sales transaction, a special volumn order with a 25% margin what is asked is whether the company should forgo it's extortionate margin in this instance and take a smaller profit

Yes, because variable costs are $3 per unit, and the sale price is $6 per unit for a contribution to cover the fixed costs and G&A Expenses of $3per unit. Thus, $3 will go directly to increase net income

That's the answer everyone. Thanks for the help, NOT!

Pleased to see your progress