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Circuit Masters Incorporated (CMI) is presently operating at 80% of capacity and manufacturing 125,000 units...

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Accounting

Circuit Masters Incorporated (CMI) is presently operating at 80% of capacity and manufacturing 125,000 units of a patented electronic component. The cost structure of the component is as follows:

image

An Italian firm has offered to purchase 20,500 of the components at a price of $26.50 per unit, FOB CMI's plant. The normal selling price is $33.50 per component. This special order will not affect any of CMI's "normal" business. Management calculated that the cost per component is $24.90, so it is reluctant to accept this special order. Required:

  1. Calculate the fixed overhead per unit?
  2. Is the cost calculation appropriate?
  3. Should the offer from the Italian firm be accepted?
imageimage Raw materials Direct labor Variable overhead Fixed overhead $6.50 per unit 6.50 per unit 8.50 per unit $425,000 per year Complete this question by entering your answers in the tabs below. Calculate the fixed overhead per unit? Note: Round your answer to 2 decimal places. b. Is the cost calculation appropriate? c. Should the offer from the Italian firm be accepted

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