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[Total: 9 Marks] Q3: BCU is a leading producer of gaming PCs. The annual capacity of the company is 150,000 PCs. The company currently produces
[Total: 9 Marks] Q3: BCU is a leading producer of gaming PCs. The annual capacity of the company is 150,000 PCs. The company currently produces and sells 25,000 PCs per year, a quantity that has been constant over the past three years. Based on the budget, the accounting department has calculated the following unit costs for the PCs: Direct materials Direct labour Manufacturing overhead (fixed and variable) Selling and Admin (fixed and variable) Total unit cost $ 100 30 40 20 190 The company's budget includes $350,000 in fixed manufacturing overhead and $150,000 in fixed selling and administrative expenses. The PCs sell for $250 each. Required 1- Advanced PC, has approached BCU with an offer to buy 5,000 PCs during the coming year. Given the size of the order, Advanced PC has requested a 20% discount on BCU's normal selling price. Should BCU accepts this offer? 2- Are there any qualitative considerations that need to be addressed? Explain 3- Return to the original data. Major PC has just signed a contract with the government to replace all its PCs. Major PC needs 80,000 PCs to complete the job and has offered to buy them from BCU at a price of $100 per PC. Major PC will pick up the PCs at BCU's plant, so BCU Page 3 of 5 will not pay the $2 per PC shipping charge (included in the selling expenses). Should BCU accepts this offer
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