Turner, Inc. budgeted 10,000 widgets for production during 2020. Turner has capacity to produce

15,000 units. Fixed factory overhead is allocated using ABC. The following estimated costs were

provided:

Direct material ($8/unit) $ 80,000

Direct labour ($20/hr. x 3 hrs./unit) 600,000

Variable manufacturing overhead ($5/unit) 50,000

Fixed factory overhead costs ($2/unit) 20,000

Total $750,000

Cost per unit = $75.00

Instructions

Answer each of the following independent questions:

a) Turner received an order for 3,000 units from a new customer in a country in which Turner has

never done business. This customer has offered $73.50 per widget. Should Turner accept the

order?

b) Turner received an offer from another company to manufacture the same quality widgets for

$72.50. Should Turner let someone else manufacture all 10,000 widgets and focus only on

distribution?