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Zenith Appliances company has a capacity to produce 6,000 hot water kettles per year. However, as of now they are producing only 3,000 kettles per
Zenith Appliances company has a capacity to produce 6,000 hot water kettles per year. However, as of now they are producing only 3,000 kettles per year for the domestic market at the following costs: Amount 20,000 30,000 Sr. No. 1 2 3 3 (a) 3 (b) 4 5 5 (a) 5 (b) Particulars Direct Materials Direct Wages Factory Overheads: Fixed Variable Administration Overhead (Fixed) Selling and Distribution Overhead: Fixed Variable Total costs: => 50,000 22,000 18,000 32,000 15,000 187,000 The domestic market can consume only 3,000 kettles per year at 80 per kettle selling price. Now an international client Mazin Inc. in the USA has placed a one-time special order of 2,000 kettles but they want to buy from Zenith Appliances at a discounted price of only 65 per kettle. Mazin has put a condition that Zenith has to accept the order in full or reject the same. Requirement: If you are working as a Chief Finance Officer at Zenith Appliances, will you accept the order by Mazin Inc. or not? Why? Answer this question based on a statement showing relevant profits / losses. Show all necessary notes, formula and workings. (12 marks)
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