Accept special sales order? Circuit Masters Inc. (CMI) is presently operating at 80% of capacity
and manufacturing 120,000 units of a patented electronic component. The cost structure of the
component is as follows: $6.00perunit6.00perunit8.00perunit$480,000peryear An Italian firm
has offered to purchase 20,000 of the components at a price of $24 per unit, FOB CMI's plant.
The normal selling price is $32 per component. This special order will not affect any of CMI's
"normal" business. Management calculated that the cost per component is $24, so it is reluctant
to accept this special order. Required: a. Show how management came up with a cost of \$24 per
unit for this component. b. Evaluate this cost calculation. Explain why it is or is not appropriate.
c. Should the offer from the Italian firm be accepted? Why or why not?.
Accept special sales order Circuit Masters Inc. (CMI) is presently o.pdf
1. Accept special sales order? Circuit Masters Inc. (CMI) is presently operating at 80% of capacity
and manufacturing 120,000 units of a patented electronic component. The cost structure of the
component is as follows: $6.00perunit6.00perunit8.00perunit$480,000peryear An Italian firm
has offered to purchase 20,000 of the components at a price of $24 per unit, FOB CMI's plant.
The normal selling price is $32 per component. This special order will not affect any of CMI's
"normal" business. Management calculated that the cost per component is $24, so it is reluctant
to accept this special order. Required: a. Show how management came up with a cost of $24 per
unit for this component. b. Evaluate this cost calculation. Explain why it is or is not appropriate.
c. Should the offer from the Italian firm be accepted? Why or why not?
