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Koji Cameras, Inc., has a Disposables Division that produces a camera that sells for $10 per unit in the open market. The cost of the product is $6 (variable manufacutring of 4, plus fixed manufacturing of $2). Total fixed manufacturing costs are $140,000 at the nromal annual production volume of 70,000 units. The Overseas Division has offered to buy 15,000 units at the full cost of $6. The Disposables Division has excess capacity and the 15,000 units can be produced without interfering with the current outside sales of 70,000 units. The total fixed cost of the Disposables Divions will not change.

Explain whether the Dispoables Division should accept or reject the offer. Show calucaltations.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9978509

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