Circuit Masters Incorporated $($CMI$)$ is presently operating at $80\%$ of capacity and manufacturing $126,000$ units of a patented electronic component. The cost structure of the component is as follows:

Raw materials

Direct labor

Variable overhead

Fixed overhead

$$6\mathrm{.}60$ per unit

$6\mathrm{.}60$ per unit

$8\mathrm{.}60$ per unit

$ $441,000$ per year

An Italian firm has offered to purchase $20,600$ of the components at a price of $$27\mathrm{.}00$ per unit, FOB CMI's plant. The normal selling price is $$33\mathrm{.}80$ per component. This special order will not affect any of CMI's "normal" business. Management calculated that the cost per component is $$25\mathrm{.}30,$ so it is reluctant to accept this special order.

Required:

a$.$ Calculate the fixed overhead per unit.

b$.$ Is the cost calculation appropriate?

c$.$ Should the offer from the Italian firm be accepted?

Complete this question by entering your answers in the tabs below.

Calculate the fixed overhead per unit?

Note: Round your answer to $2$ decimal places.

Fixed overhead per unit

Circuit Masters Incorporated $($CMI$)$ is presently operating at $80\%$ of capacity and manufacturing $126,000$ units of a patented electronic component. The cost structure of the component is as follows:

Raw materials

$,$$$6\mathrm{.}60$ per unit

Direct labor

$,6\mathrm{.}60$ per unit

Variable overhead $8\mathrm{.}60$ per unit

Fixed overhead

$$441$;$000$ per year

An Italian firm has offered to purchase $20,600$ of the components at a price of $$27\mathrm{.}00$ per unit, FOB CMI's plant. The normal selling price is $$33\mathrm{.}80$ per component. This special order will not affect any of CMI's "normal" business. Management calculated that the cost per component is $$25\mathrm{.}30,$ so it is reluctant to accept this special order.

Required:

a$.$ Calculate the fixed overhead per unit.

b$.$ Is the cost calculation appropriate?

c$.$ Should the offer from the Italian firm be accepted?

Complete this question by entering your answers in the tabs below.

Req A

Req $B$ and $C$

b$.$ Is the cost calculation appropriate?

c$.$ Should the offer from the Italian firm be accepted?

b$.$ The cost calculation is appropriate

c$.$ The offer from the Italian firm should be