Piper Rose Boutique Has Been Approached by the Community College

Essay

Piper Rose Boutique has been approached by the community college to make special polo shirts for the faculty and staff. The college is willing to buy 4,000 polos with its own design for $6.00 each. The company normally sells its shirts for $12.00 each. The company has enough excess capacity to make this order. A breakdown of their costs is as follows: $$\begin{array} { l r } \text { Direct materials } & \$ 2.00 \\\text { Direct labor } & 0.50 \\\text { Variable costs } & 1.50 \\\text { Fixed costs } & 2.50 \\\text { Total cost per unit } & \$ 6.50\end{array}$$ Should Piper Rose Boutique accept the special order made by the college?