special order decision operating at full capacity the following monthly financial da 1571350

Special Order Decision: Operating at Full Capacity. The following monthly financial data are for Sport Socks, Inc., a maker of socks for runners. Sport Socks makes and sells 40,000 pairs each month to regular customers.

Sport Socks received an offer from a large sporting goods store to purchase 15,000 socks next month for $0.90 per pair. Assume Sport Socks can only produce up to 40,000 pairs of socks each month. Thus any special orders would result in reduced sales to regular customers. However, fixed costs willnot change as a result of the special order. Required:

a. Using the differential analysis format presented in , determine whether Sport Socks would be better off rejecting the special order (Alternative 1) or accepting the special order (Alternative 2).

b. Summarize the result of accepting the special order using the format presented in .