Jeff's Widget Corporation Produces and Sells a Part Used in the Production

question 105

Essay

Jeff's Widget Corporation produces and sells a part used in the production of bicycles. The unit costs associated with this part are as follows:
Direct materials $.14
Direct labor .30
Variable manufacturing overhead .20
Fixed manufacturing overhead .05
Total cost $.69
Saturn Company has approached Jeff's Widget Corporation with an offer to purchase 20,000 units of this part at a price of $.80. Accepting this special sales order will put idle manufacturing capacity to use and will not affect regular sales. Total fixed costs will not change.
Determine whether or not the special order should be accepted. Justify your conclusion.

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Definitions:

Fast Adaptive Mode

High-speed processing algorithms; Allison uses this term to describe an operating condition in which large changes are made to initial shift conditions to adjust for major system tolerances such as solenoid-to-solenoid, main pressure, and clutch-to-clutch variations. A new or newly rebuilt transmission should be programmed to operate in fast adaptive mode.

Close-ratio Gearing

A transmission design where the gear ratios are closer together, allowing the engine to operate more consistently near its optimal RPM for performance.

Standard Gear Ratios

The predefined set of gear ratios used in transmissions to optimize vehicle performance and fuel efficiency under normal driving conditions.

Latching Solenoid

A solenoid device that can hold its position (engaged or disengaged) without needing continuous electrical power, a reemphasis on its function for maintaining states.