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:

Job Satisfaction

The level of contentment employees feel about their work, which can affect their performance and commitment.

Overall Motivation

The combined internal drive and external influences that energize, direct, and sustain an individual's efforts toward achieving a goal.

Trust

Confidence in the honesty, integrity, reliability, and fairness of a person or system.

Major Institutions

Key established organizations or foundations, especially those influential in society, like schools, hospitals, or banks.