101) The Deerfield Company has annual productive capacity of 60,000 units per year.  Budgeted operating results for 2006 are as follows:

Revenues (50,000 units @ $10)$500,000

Variable costs:

Manufacturing (50,000 @ $3.20)$160,000

Selling (50,000 @ $0.80)    40,000  200,000

Contribution margin$300,000

Fixed costs:


Selling and administrative    80,000  180,000

Operating income$120,000

A wholesaler from another country wants to buy 5,000 units at a price of $8 per unit.  All fixed costs would remain within the relevant range.  Variable manufacturing costs would be the same per unit but variable selling costs would increase by $2 per unit on the special order only.

a. Determine whether the company should produce the special order.

b. Assuming Deerfield’s objective is to maximize profit, if the customer wants a special order of 20,000 un

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