ABC Company in the U$.$S$.$A$.$ manufactures combination heating and air$-$conditioningunits. The outside condensing component is purchased from outside supplier as needed inmanufacturing. This component is also sold separately by ABC Company as replacements,with the ABC label on each component.In addition to selling the line to various trade outlets in three$-$state area, the companymanufactures the combination unit for X Company, which operates in another region of thecountry and sells these units under a different trade name. The combination unit manufacturedby ABC Company is recognized as one of the better units produced anywhere. On units soldin the three$-$state area, ABC Company has a freight advantage over the other competitorsbecause their manufacturing plants are located outside the three$-$state area.ABC Company has been successful; that is$,$ the sales have been showing a gradual andconsistent increase in the three$-$state area. Orders from the other company have increasedfrom year to year during the past five years at a rate approximately twice that of the ABCunits in the three$-$state area. In $2023,$ sales to X Company amounted to $20$ percent of the totalvolume produced by ABC Company.ABC Company is currently involved in developing its profit plan for $2024.$ It has aneffective profit planning and control program. The annual sales plan has been realistic eachyear for the past five years except for one year when actual sales were $15$ percent below plan.The $2024$ tentative budget includes planned sales to X Company of $2,000$ units $($whichwill be one$-$fourth of ABCs production$)$ at $$6,000$ per unit. The sale price to regularcustomers in ABCs three$-$state area is $$7,200.$Recently ABC received a tentative cash offer of $$6,200$ per unit for $500$ units of theregular product during $2024.$ This offer came from a company that is outside ABCs area, butit would compete in X Companys sales area. This offer has cause ABC to reconsider theagreement with X Company. ABCs $2024$ tentative budget includes the X Companyagreement as follows:Sales to X Company $(2,000$ units$)$ $$12,000,000$Variable costs to manufacturer $(2,000$ units$)(7,200,000)$Fixed costs $($one$-$fourth of the total fixedCosts planned for all ABCs operations$)(5,000,000)$Profit $($loss$)$ on the contract $ $200,000$Recommendation: Discontinue the sales to X Company or increase the price to $$6,500$ perunit.Identify and explain the major issues that the executive committee should considerabout the special sales agreement with X Company and the new tentative offer.