PARTA (8 Marks)

CBA Inc., a manufacturer, has received a special request for 1000 units of its product, widgets, at a price of $ 54.00 per unit. The normal selling price for widgets is $ 60 per unit. CBA Inc.'s annual capacity of 25,000 units and its current sales are 21,000 units per year. To analyze this special order, Jim Blum, the sales manager, gathered the following budgeted information:

Direct material cost per unit $2.00

Direct labour per unit 2.15

Variable overhead per unit 0.91

Fixed manufacturing overhead per unit 1.10 Variable selling and administrative per unit 10.96

The variable selling and administrative costs per unit represent commissions and would not be incurred on this special order.

a) Should CBA Inc. accept this special order?

Justify your answer with proper calculations. (4 marks)

b) Assume CBA Inc.'s current sales are 25,000 units annually. Should CBA Inc. accept this special order? Justify your answer with proper calculations. (4 marks)