Q.2(A) The Kathmandu Product Ltd; a company engaged in production of specialized goods called 'Kath Craft' has been utilising its capacity only by 80% of its available capacity. The company received an special offer to supply 25,000 units of its product most similar to one the company at present is selling in the market, but under different brand name. The price offered is 100 per unit. The data relating to produce one unit of regular product are presented below: Direct Material Cost 4 units @ $ 10 Direct Labour Cost 3 hours @ $ 10 Manufacturing Overhead 3 hours @ $ 15 (Based on Direct Labour Hour) Total Cost per Unit $ 40.00 $ 30.00 $ 30.00 $ 100.00 The company at present is selling its product at $ 130 per unit. The company has adopted a policy of defining its capacity in direct labour hour. The annual normal budgeted hour is 3,00,000 hours and the budgeted fixed overhead for the period is $ 15,00,000. All manufacturing overheads are applied to production on the basis of direct labour hour at $15 per hour. The special offer will have no other cost than regular production cost. Required: (a) Should the company accept this offer and also show how total profit of the company would change by accepting this offer? (b) Would the company have any opportunity cost of the offer? (c) In the above result (a), what should be the minimum acceptable offer price? (d) What other considerations are relevant to make this decision? [8] [2] [2] [3]