Jones Company makes a product that regularly sells for $13.50 per unit.

If jones company has excess capacity, should it accept the offer from Nelson? Show your calculations. does your answer change if Jones company is operating at capacity? Why or why not?

Expected increase in revenue Expected increase in variable manufacturing costs Expected increase (decrease) in operating income The product has variable manufacturing costs of $11.50 per unit and fixed manufacturing costs of $1.90 per unit (based on $152,000 total fixed costs at current production of 80,000 units). Therefore, total production cost is $13.40 per unit. Jones Company receives an offer from Nelson Company to purchase 4,500 units for $7.50 each. Selling and administrative costs and future sales will not be affected by the sale, and Jones does not expect any additional fixed costs