Micro Enterprises has the capacity to produce 10,000 widgets a month, and currently makes and sells 9,000 widgets a month. Widgets normally sell for $6 each, and cost an average of $5 to make, including fixed costs. The monthly fixed costs are $18,000. Coyote has offered to buy 1,500 widgets (all or nothing) for $4 each.

The accountant has determined that the excess production (beyond capacity) can be accommodated in the short term by incurring an incremental (fixed) cost of $800.

Should Coyotes offer be accepted? Please show your work.

A. No, because it will lose $1 per unit

B. No, because the opportunity costs are less than the gains

C. Yes, because the contribution from the sale exceeds the incremental costs

D. Yes, because it makes $1 per unit in the short run

E. Unable to determine