Question - Kasten, Inc. budgeted 10,000 widgets for production during 2010. Kasten has capacity to produce 12,000 units. Fixed factory overhead is allocated to production. The following estimated costs were provided:
Direct material ($7/unit) $ 70,000
Direct labor ($15/hr. × 2 hrs./unit) 300,000
Variable manuf overhead ($3/unit) 30,000
Fixed factory overhead costs ($5/unit) 50,000
Total $450,000
Cost per unit = $45
Kasten received an order for 1,000 units from a new customer in a country in which Kasten has never done business. This customer has offered $43 per widget.
Should Kasten accept the order? How much would profit change if it accepts the offer?