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Circuit Masters Incorporated ( CMI ) is presently operating at 8 0 % of capacity and manufacturing 1 2 9 , 0 0 0 units
Circuit Masters Incorporated CMI is presently operating at of capacity and manufacturing units of a patented electronic component. The cost structure of the component is as follows:
Raw materials $ per unit
Direct labor per unit
Variable overhead per unit
Fixed overhead $ per year
An Italian firm has offered to purchase of the components at a price of $ per unit, FOB CMI's plant. The normal selling price is $ per component. This special order will not affect any of CMI's "normal" business. Management calculated that the cost per component is $ so it is reluctant to accept this special order.
Required:
Calculate the fixed overhead per unit.
Is the cost calculation appropriate?
Should the offer from the Italian firm be accepted?
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