Jeff's Widget Corporation produces and sells a part used in the production of bicycles. The unit costs associated with this part are as follows: Direct materials $.14 Direct labor .30 Variable manufacturing overhead .20 Fixed manufacturing overhead .05 Total cost $.69 Saturn Company has approached Jeff's Widget Corporation with an offer to purchase 20,000 units of this part at a price of $.80. Accepting this special sales order will put idle manufacturing capacity to use and will not affect regular sales. Total fixed costs will not change. Determine whether or not the special order should be accepted. Justify your conclusion.
Jeff's Widget Corporation produces and sells a part used in the production of bicycles. The unit costs associated with this part are as follows:
Direct materials $.14
Direct labor .30
Variable manufacturing overhead .20
Fixed manufacturing overhead .05
Total cost $.69
Saturn Company has approached Jeff's Widget Corporation with an offer to purchase 20,000 units of this part at a price of $.80. Accepting this special sales order will put idle manufacturing capacity to use and will not affect regular sales. Total fixed costs will not change.
Determine whether or not the special order should be accepted. Justify your conclusion.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
