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Say Company A has capacity to produce 100,000 units of product X. The cost estimate per unit based on current capacity of 80% is as follows:
$ Per unit
Direct material $2.00
Direct labor $5.00
Variable production overhead $3.00
Fixed production overhead $4.00
Total $14.00
The company sells the product X to its regular customer at $20.00. However, a non- regular customer has approached the company to purchase the excess capacity at $18 each.
Required
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