Integrated Masters, Inc. (IMI), is presently operating at 80% of capacity and ma

Question

Integrated Masters, Inc. (IMI), is presently operating at 80% of capacity and manufacturing 123,000 units of a patented electronic component. The cost structure of the component is as follows:    
  

  

An Italian firm has offered to purchase 20,300 of the components at a price of $25.5 per unit, FOB IMI's plant. The normal selling price is $32.9 per component. This special order will not affect any of IMI's "normal" business. Management calculated that the cost per component is $24.1, so it is reluctant to accept this special order.

Required:

a. Calculate the fixed overhead per unit? (Round your answer to 2 decimal places.)

Raw materials $ 6.30 per unit Direct labor 6.30 per unit Variable overhead 8.30 per unit Fixed overhead $ 393,600 per year

Explanation / Answer

Fixed overhead per unit = Total fixed overhead / Current output

                                       = $393600 / 123000 units = $3.20/unit

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