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Circuit Masters, Inc. (CMI), is presently operating at 80% of capacity and manufacturing 129,000 units of a patented electronic component. The cost structure of the
Circuit Masters, Inc. (CMI), is presently operating at 80% of capacity and manufacturing 129,000 units of a patented electronic component. The cost structure of the component is as follows: |
Raw materials | $ | 6.90 | per unit |
Direct labor | 6.90 | per unit | |
Variable overhead | 8.90 | per unit | |
Fixed overhead | $ | 516,000 | per year |
An Italian firm has offered to purchase 20,900 of the components at a price of $28.5 per unit, FOB CMI's plant. The normal selling price is $34.7 per component. This special order will not affect any of CMI's "normal" business. Management calculated that the cost per component is $28.5, so it is reluctant to accept this special order. |
Required: | |
a. | Calculate the fixed overhead per unit? |
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