Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Circuit Masters Incorporated (CMI) is presently operating at 80% of capacity and manufacturing 127,000 units of a patented electronic component. The cost structure of the

Circuit Masters Incorporated (CMI) is presently operating at 80% of capacity and manufacturing 127,000 units of a patented electronic component. The cost structure of the component is as follows:

Raw materials $ 6.70 per unit
Direct labor 6.70 per unit
Variable overhead 8.70 per unit
Fixed overhead $ 457,200 per year

An Italian firm has offered to purchase 20,700 of the components at a price of $27.50 per unit, FOB CMI's plant. The normal selling price is $34.10 per component. This special order will not affect any of CMI's "normal" business. Management calculated that the cost per component is $25.70, 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?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Health Economics And Financing

Authors: Thomas E. Getzen, Michael S. Kobernick

6th Edition

1119815681, 9781119815686

More Books

Students also viewed these Accounting questions