Campbell Company Has an Annual Capacity of 18,000 Units

Essay

Campbell Company has an annual capacity of 18,000 units. Budgeted operating results for 2016 are as follows:
Fixed costs:
A foreign wholesaler wants to buy 1,000 units at a price of $40 per unit. All fixed costs would remain within the relevant range. Variable selling costs on the special order would be the same as variable selling costs for regular orders.
Required:
a. Determine the effect on operating income if the company produces the special order.
b. Should the company produce the special order?
c. Determine operating income if the customer had wanted a special order of 3,000 units and the company produced the special order.
d. Should the company produce the 3,000-unit special order?
e. Discuss any nonquantitative factors the company might want to consider when making the decision.