Integrated Masters Inc. (IMI) is presently operating at 80% of capacity and manufacturing 115,000 units of a patented electronic component. The cost structure of the component is as follows: 

 

An Italian firm has offered to purchase 21,700 of the components at a price of $32.5 per unit, FOB IMI's plant. The normal selling price is $371 per component. This special order will not affect any of IMI's "normal" business. Management calculated that the cost per component is $29.7, so it is reluctant to accept this special order. 

Required

a. Calculate the fixed overhead per unit? 

b. Is the cost calculation appropriate? 

c. Should the offer from the Italian firm be accepted?

Transcribed Image Text:

Raw materials Direct labor Variable overhead Fixed overhead 7.70 per unit 7.70 per unit 9.70 per unit $529,000 per year Raw materials Direct labor Variable overhead Fixed overhead 7.70 per unit 7.70 per unit 9.70 per unit $529,000 per year

Answer rating: 100% (QA)

1 Fixed overhead cost per unit Fixed overhead cost Units 529000 115000 460 2 No because fixed ... View the full answer