Reference no: EM132515704

Marquette Manufacturing produces "invisible" electric dog fences, sold through retail locations nationwide. The selling price of the fence is $150 per unit. The cost to manufacture and market the fences is shown below. These figures represent the cost at the company's normal volume of 3,000 units per month.

Unit Manufacturing Costs

Variable materials $ 15.00

Variable labor $ 17.50

Variable overhead $ 12.50

Fixed overhead $ 16.00

Total unit manufacturing costs $ 61.00

Unit Marketing CostsVariable $ 12.00

Fixed overhead $ 17.00

Total unit marketing costs $ 29.00

Total unit costs $ 90.00

• On March 1, Marquette is approached by the developer of a large subdivision who wants to install an invisible fence in the yard of 1,200 homes he is constructing. The developer will contract with Marquette for the 1,200 fences on the condition that they are delivered within 30 days (March 31). This is not good timing for Marquette since they have recently signed a contract with Home Warehouse, a national home improvement chain and have been working at 100% capacity for several months. If Marquette accepts the builder's order, it will lose 1,200 units that would normally be sold to one of its existing customers. When they tell the developer that they do not believe they can fill his order, he offers to reimburse the company for his "share" of the fixed manufacturing costs and will pay a $5,000 "bonus" on delivery. Since the sale to the developer will not incur any variable marketing costs, Marquette reconsiders accepting the developer's order.

Question 1: What impact will accepting this order have on Marquette's income in March? Should Marquette accept the order from the developer? Why or Why not? (Show all supporting calculations).