=+Inquiry elicits that wages are directly variable with output up to 22000 units per month, but rise to fl.OO per unit thereafter.

Capacity per month is limited to one-twelfth annual capacity -

there is no slack labour or machinery transferable in the short run from other products. 60% of the material costs concern wire transferred in from another division of the firm at aprice yielding 40% contribution to that division. Sundry plant expense is 25%

fixed.

Required:

(a) present areport calculating the probable advantage or otherwise of accepting the chain store order. Clearly explain the assumptions on which your calculation is based.