A Japanese computer manufacturing company has contacted Babbage Products with an offer to purchase 50,000 daisy wheels at a price of $4.25 each. Babbage’s full cost of producing a daisy wheel is $4.50, of which $3.00 is variable. The regular selling price is $7.00. The computer manufacturer’s offer is on an all-or-none basis. Annual sales to regular customers must be reduced by 15,000 daisy wheels to meet the terms of the Japanese order.

Required:

Determine if Babbage should accept the Japanese offer in the short run.1