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?