Accounting for Decision Making and Control 6th Edition by Jerold Zimmerman

Exercise 9

Winter Games manufactures a competitive line of skis and sells its skis to retailers at a price of $225 per pair. Based on an annual volume of 5,000 pairs, the cost per pair is $185:

Sports Palace, a discount sporting goods store, currently purchases 500 pairs of skis from Winter Games. Sports Palace has asked to purchase 1,000 pairs of skis under a private brand label, at a price of $200 per pair. The skis would be identical to those normally sold for $225.
Winter Games believes that if it accepts the order, Sports Palace will cancel its usual order of 500 pairs. These sales cannot be recouped elsewhere. If this special order is accepted, the direct labor hours for the additional 500 skis would have to be compensated at overtime rates (at 1V2 times the base rate). Analysis shows that variable overhead varies with total direct labor dollars at the rate of $0.40 per direct labor dollar.
Should Winter Games accept the special order from Sports Palace