Surly Company Makes Small Boats Required:
A) Should Surly Company Reject the Special Order

Essay

Surly Company makes small boats.The company produces and sells 5,500 boats per year at a selling price of $160 per boat.Surly Company has excess capacity and is trying to get special orders.A new retailer wants to purchase 1,000 boats for $125 per boat.Surly Company is going to decline the special order because it costs $130 to make a single boat as seen below:
$\begin{array}{ll}\text { Direct materials } & \$ 50 \text { per unit } \\\text { Direct manufacturing labor } & \$ 55 \text { per unit } \\\text { Variable manufacturing overhead } & \$ 10 \text { per unit } \\\text { Fixed manufacturing overhead } & \$ 15 \text { per unit } \\\text { Total } & \$ 130 \text { per unit }\end{array}$
Required:
A) Should Surly Company reject the special order from the new retailer? Why?
B) How much will Surly's net income increase with the special offer?