Abraham Manufacturing produces 22,000 rubber engine mounts each year for use in its electric cart manufacturing plant. Abraham’s engine mounts have an excellent reputation for strength and durability. At a production level of 22,000, the cost per unit is as follows:

A competitor, Jenkins Cart Company, is interested in purchasing 14,000 rubber engine mounts from Abraham. Jenkins has offered to pay $4.17 each for the engine mounts. Abraham Manufacturing has the capacity and can easily manufacture the engine mounts for Jenkins.
Several managers at Abraham are concerned that there would be no financial benefit whatsoever for Abraham if the engine mounts are sold at cost.
Required:

a. Prepare a schedule that details the advantage or disadvantage of selling the 14,000 engine mounts to Jenkins.

b. Discuss the qualitative aspects of selling the parts to Jenkins.

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Direct material Direct labor Variable overhead Fixed overhead Total $ .53 1.45 .92 1.27 $4.17