b2 A business manufactures a single product with a selling price of 21 and variable unit costs of 7. Period fixed overheads are 4,942 per month. Current production levels are 700 units per month (at 80% capacity). A customer has offered to buy up all of the business spare capacity for 3,220.

Required:

Evaluate the customers offer from financial viewpoint and discuss whether they should accept or reject the special offer. (10 marks)

Note: show all workings.