Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal
activity level of units per year is:
The normal selling price s $ per unit. The company's capacity is units per year. An order has been received from a mail
order house for units at a special price of $ per unit. This order would not affect regular sales or the company's total fixed
costs.
Required:
What is the financial advantage disadvantage of accepting the special order?
As a separate matter from the special order, assume the company's inventory includes units of this product that were
produced last year and that are inferior to the current model. The units must be sold through regular channels at reduced prices. The
company does not expect the selling of these inferior units to have any effect on the sales of its current model. What unit cost is
relevant for establishing a minimum selling price for the inferior units?
