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Business, 06.05.2021 18:40 kingzae5

ABC Corporation makes a series of products. Management is considering a special order for 500 units of product A1 at $30 each. The normal selling price of product A1 is $50. The cost information is as follows: Cost per unit ($) Direct materials 10 Direct labor 8 Variable manufacturing overhead 6 Fixed manufacturing overhead 7 Variable selling and administrative expenses 5 Fixed selling and administrative expenses 9 If the special order were accepted, normal sales of this and other products would not be affected. The company has ample excess capacity to produce the additional units. (1). If the special order were accepted, what would be the impact on the company's overall profit? Please show all calculations and label items clearly. (2). Assume the company has 200 units of this product left over from last year that are inferior to the current model. The units must be sold through regular channels at reduced prices. What should be the minimum selling price for these units? Please explain why each cost is relevant or irrelevant for this decision making.

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