Cessnod manufactures parts for aircraft engines. The selling price for these parts is $3,400 per unit. Cessnod has the capacity to manufacturer 110,000 parts but is currently manufacturing 95,000 parts. Cessnod’s current results per unit are as follows:

................................................................................................. Per Unit

Direct materials...........................................................................$1,125

Direct labor...................................................................................1,100

Variable manufacturing overhead..................................................340

Fixed manufacturing overhead.......................................................216   

Variable marketing............................................................................175

Fixed marketing..................................................................................84

                  Total........................................................................... $3,040

1. Cessnod has received a special offer to make 10,000 parts for Selby at a price of $2,900 per part. Based on this information should Cessnod accept or reject Selby’s offer? Show calculations to support your answer.
2. Suppose Cessnod’s capacity is for 100,000 units. If all other information is the same, should Cessnod accept or reject Selby’s offer? Show calculations to validate your answer.

Answer rating: 100% (QA)

a ANSWER Order must be accepted at 2 900 To make a good decision acceptance of offers below the normal selling price are assessed through marginalcont... View the full answer