DataSave is a manufacturer of USB Flash Drives. Their 16GB model wholesales for $32. DataSave has been approached by a major sports franchise with a special order for 25,000 16GB flash drives in their team colours at a price of $18 each. The special colouring will not add any new costs. DataSave's total cost of production for this model is $22 per USB, as follows:
Variable costs: | |
Direct materials | $11.50 |
Direct labour | 3.75 |
Variable overhead | 2.00 |
Fixed overhead | 4.75 |
Total cost | $22.00 |
Prepare an incremental analysis to determine whether DataSave should accept the special sales order assuming fixed costs would not be affected by the special order.