Donda Corporation has a maximum capacity to produce 30 000 units of serving trays per month. The unit cost is as follows:

Direct material cost: $5

Direct Labour cost: $7

Fixed Manufacturing overhead: $3

Variable manufacturing overhead: $2.20

Currently it produces and sells 25 000 units to its regular customers for $22. Tango Limited has approached Donda Corporation with a business proposal to supply them with 4000 serving trays at a special price of $17 per tray.

Required:

1. Should the business proposal be accepted? Show all calculations. (2 marks)

2. If the business proposal is for 11 000 units, should it be accepted? Show all calculations. (2 marks)