Circuit Masters Incorporated $($CMI$)$ is presently operating at $80\%$ of capacity and manufacturing $120,000$ 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{.}00$ per unit

$6\mathrm{.}00$ per unit

$8\mathrm{.}00$ per unit

$$480,000$ per year

An Italian firm has offered to purchase $20,000$ of the components at a price of $$24$ per unit, FOB CMI's plant. The normal selling price

is $$32$ per component. This special order will not affect any of CMI's "normal" business. Management calculated that the cost per

component is $$24,$ 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?