Reference no: EM132523594

Juice It Ltd involves in making bottled fruit juices called Tango. Currently, the factory is operating below its full capacity. Below is the ?nancial result for year 2019:

Sales (18,000 bottles) 27,000
Variable production cost 10,800
Fixed production cost 45,000
Total production cost 15,300
Selling cost 4,000
Total cost 19,300
Net profit  7,000

A direct seller offers to purchase bottles of Tango at $0.90 per bottle. The management is unwilling to accept the order because it is not only below the selling price but also below its production cost per unit.

Question a) Determine whether the company should accept or reject the order of Tango Show your computations.

Question b) Explain the relevant qualitative factors that need to be considered when making decision on whether to accept or reject the special order for Tang