20

20 A company's total production capacity is 3,100 units per month. Currently, the company plans to make and sel 2,500 unit per month for the next 12 months. The company received an offer from a new customer to purchase 500 units at $76 per unit for the next five months. Normally, the product sells for $85 and the company's absorption cost system shows that manufacturing costs (direct material, direct labor, variable MOH and fixed MOH) are $60 per unit and selling costs are $16 per unit. Should the company accept the offer? A. No, because the company will only break even on this offer. B. No, because the company's ROI will most likely decrease. C. Yes, because operating income will increase. D. Yes, because excess capacity will increase. E. None of the above