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Sophia's Shoes produces leather shoes sold to retail chains for $75 each. The plant capacity is...

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Accounting

Sophia's Shoes produces leather shoes sold to retail chains for $75 each. The plant capacity is 300,000 pairs annually, but normal volume is 200,000 pairs. Unit and total costs at normal volume are as follows:

Type of Cost

Unit Costs

Total Costs

Direct materials

$20.00

$4,000,000

Direct labor

$15.00

$3,000,000

Manufacturing support

$25.00

$5,000,000

Selling and administrative

$10.00

$2,000,000

Total costs

$70.00

$14,000,000

Fixed manufacturing support costs are $3,500,000, and fixed selling and administrative costs are $1,500,000.

A prospective customer offers to purchase 50,000 pairs at $60 each, with simplified packaging reducing variable selling and administrative costs by 40%.

Required: Assess if Sophia's Shoes should accept the special order. Prepare a detailed profit impact statement to justify your decision.

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