Problem - Palmer Company manufactures and sells trophies for winners of athletic events. The company normally charges $60 per trophy. The average costs for a trophy is shown below.
Direct materials $22
Direct labor 12
Variable manufacturing overhead 8
Variable marketing expenses 4
Fixed manufacturing overhead 16 ($2,000,000 fixed manufacturing overhead/125,000 trophies)
Total costs $62
Palmer Company has enough idle capacity to accept a one-time only special order for 10,000 trophies at $50 per trophy. Palmer Company will not incur any variable marketing expenses for this order and no additional fixed costs.
Required - Should the company accept this special order? Please state your decision and provide numerical support for your decision.