Business, 29.05.2021 17:40 pleasehelpmeonthis
Our company makes and sells a single product at the selling price of $97 per unit. In January, we upgraded our manufacturing facility to increase capacity and reduce variable costs per unit (this significantly increased our fixed manufacturing costs). We now have the capacity to make 1,000 units per month. Over the next three months, we expect our production and sales to average 700 units per month. We recently received a take-it-or-leave-it offer for 100 units from a one-time customer. The customer offers to pay us $65 per unit. To help us evaluate this offer, our accounting staff provided the following information (identical for our regular sales and the special order): our normal absorption manufacturing cost per unit equals $50, and our variable selling cost per unit equals $15. Which of the following is correct?
a. We should reject the offer because the offered price is much lower than the normal selling price
b. We should accept the offer because it would reduce our excess capacity cost
c. We should reject the offer because it would reduce our ROI
d. We should accept the offer because it would increase our net operating income
e. Quantitatively, we are indifferent between accepting and rejecting the offer
Answers: 2
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Our company makes and sells a single product at the selling price of $97 per unit. In January, we up...
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