Reference no: EM132516900

Ray Ban is one of the most recognisable sunglasses brands. The following presents hypothetical information in regards to the receipt of a special order by this firm. Ray Ban currently has capacity to produce 120,000 units per month which it sells for $170 per unit.

The typical cost to manufacture each pair of sunglasses is provided below:

Direct materials $40.00

Direct labour $20.00

Variable overhead $15.00

Fixed overhead $10.00

Ray Ban is currently operating at 98% capacity. Recently, Ray Ban was approached by a national sporting team who was wanting to purchase 5,000 pairs of custom sunglasses for the members of their team and support staff for $100 per pair. These sunglasses will include a custom colour finish and case that will cost an extra $20.00 per unit. This special order will need to be completed in the next month. If the special order is accepted, Ray Ban will need to hire a temporary staff member to facilitate the relationship between the firm and the sporting team. The cost associated with the staff member is expected to be $15,000 for the month.

Required:

Question 1. Evaluate whether this order is acceptable on financial grounds. Ensure that your answer is discussed and supported by relevant calculations/workings .

Question 2. Identify and discuss at least three relevant qualitative factors that should be considered in the evaluation of this special order