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Export order Delta Screens Corporation is currently operating at $60\%$ of capacity in producing $6,000$ screens annually. Delta recently received an offer from a company in Germany to purchase $2,000$ screens at $$500$ per unit.

$6-25$ Export order Delta Screens Corporation is currently operating at $60\%$ of

capacity in producing $6,000$ screens annually. Delta recently received an offer

from a company in Germany to purchase $2,000$ screens at $$500$ per unit. Delta

has not previously sold products in Germany. Budgeted production costs for

$6,000$ and $8,000$ screens follow:

Delta has been selling its product at a markup of $10\%$ above full cost.

Delta's marketing manager believes that although the price offered by the

German customer is lower than current prices, Delta should accept the order

to gain a foothold in the German market. The production manager, however,

believes that Delta should reject the order because the unit cost is higher than

the price offered.

Required

a$.$ Explain what causes the apparent decrease in cost from $$600$ per unit to $$550$ per unit when

production increases from $6,000$ to $8,000$ units.

b$.$ If the president of Delta Screens Corporation calls on you to resolve the difference in opinions,

what will you recommend? Why?units

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