Circuit Masters Incorporated (CMI) is presently operating at 80% of capacity and manufacturing 125,000 units of a patented electronic component. The cost structure of the component is as follows:

An Italian firm has offered to purchase 20,500 of the components at a price of $26.50 per unit, FOB CMI's plant. The normal selling price is $33.50 per component. This special order will not affect any of CMI's "normal" business. Management calculated that the cost per component is $24.90, so it is reluctant to accept this special order. Required:

1. Calculate the fixed overhead per unit?
2. Is the cost calculation appropriate?
3. Should the offer from the Italian firm be accepted?

Raw materials Direct labor Variable overhead Fixed overhead $6.50 per unit 6.50 per unit 8.50 per unit $425,000 per year 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. b. Is the cost calculation appropriate? c. Should the offer from the Italian firm be accepted