Circuit Masters Incorporated (CMI) is presently operating at 80% of capacity and manufacturing 125,000 units of a patented electronic component. The cost structure of the component is as follows: Raw materials Direct labor Variable overhead Fixed overhead $ 6.50 per unit 6.50 per unit 8.50 per unit $ 425,000 per year An italian firm has offered to purchase 20,500 of the components at a price of $26.50 per unit, FOB CMI's plant. The normal selling price is $33.50 per component. This special order will not affect any of CMI's "normal" business. Management calculated that the cost per component is $24.90, 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? Complete this question by entering your answers in the tabs below.
Circuit Masters Incorporated (CMI) is presently operating at 80% of capacity and manufacturing 125,000 units of a patented electronic component. The cost structure of the component is as follows: Raw materials Direct labor Variable overhead Fixed overhead $ 6.50 per unit 6.50 per unit 8.50 per unit $ 425,000 per year An italian firm has offered to purchase 20,500 of the components at a price of $26.50 per unit, FOB CMI's plant. The normal selling price is $33.50 per component. This special order will not affect any of CMI's "normal" business. Management calculated that the cost per component is $24.90, 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? Complete this question by entering your answers in the tabs below.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Please dont provide solution in an image format thnku
Transcribed Image Text:Circuit Masters Incorporated (CMI) is presently operating at 80% of capacity and manufacturing 125,000 units of a patented electronic
component. The cost structure of the component is as follows:
Raw materials
Direct labor
Variable overhead
Fixed overhead
An italian firm has offered to purchase 20,500 of the components at a price of $26.50 per unit, FOB CMI's plant. The normal selling
price is $33.50 per component. This special order will not affect any of CMI's "normal" business. Management calculated that the cost
per component is $24.90, so it is reluctant to accept this special order.
$ 6.50 per unit
6.50 per unit
8.50 per unit
$425,000 per year
Required:
a. Calculate the fixed overhead per unit?
b. Is the cost calculation appropriate?
c. Should the offer from the Italian firm be accepted?
Complete this question by entering your answers in the tabs below.
Req A
Req B and C
Calculate the fixed overhead per unit?
Note: Round your answer to 2 decimal places.
Fixed overhead per unit.
Transcribed Image Text:Circuit Masters Incorporated (CMI) is presently operating at 80% of capacity and manufacturing 125,000 units of a patented electronic
component. The cost structure of the component is as follows:
Raw materials
Direct labor
Variable overhead
Fixed overhead
$ 6.50 per unit
6.50 per unit
8.50 per unit
$ 425,000 per year
An Italian firm has offered to purchase 20,500 of the components at a price of $26.50 per unit, FOB CMI's plant. The normal selling
price is $33.50 per component. This special order will not affect any of CMI's "normal" business. Management calculated that the cost
per component is $24.90, 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?
Complete this question by entering your answers in the tabs below.
Req Band C
Req A
b. Is the cost calculation appropriate?
c. Should the offer from the Italian firm be accepted?
b.
The cost calculation is appropriate
c. The offer from the Italian firm should be
<Reg A
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 4 images
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education