Sharman Athletic Gear Inc. (SAG) is considering a special order for 16, 200 baseball caps...
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Sharman Athletic Gear Inc. (SAG) is considering a special order for 16, 200 baseball caps with the logo of East Texas University (ETU) to be purchased by the ETU alumni association. The ETU alumni association is planning to use the caps as gifts and to sell some of the caps at alumni events in celebration of the university's recent national championship by its baseball team. Sharman's cost per hat is $4.20, which includes $2.10 fixed cost related to plant capacity and equipment. ETU has made a firm offer of $41,000 for the hats, and Sharman, considering the price to be far below production costs, decides to decline the offer. Required: Determine the total relevant cost of the special order. Total cost of the special order In terms of maximizing short-term operating profit, did Sharman make the wrong decision in declining the offer from ETU? Yes No
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