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Should lee inc accept the order

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Question - Lee Inc. produces authentic African Herbs for the European Market. The costs of producing and selling one litre of this product at the current activity level of 15,000 litres per month are given below:

Direct materials GHS 6.00

Direct labour GHS 5.80

Variable manufacturing overhead GHS 3.50

Fixed manufacturing overhead GHS 7.5

Variable selling and administrative expense GHS 3.85

Fixed selling and administrative expense GHS 9.50

The price of the product usual sells for GHS 42. Lee Inc has the capacity to produce 25,000 litres per month. However, due to high cost of labour, current production is limited to 15,000 litres every month. One-third of the fixed manufacturing overhead is specific to individual jobs.

Alhaji Kamara has requested for an order of 850 litres of the beverage at GHS 30 per litre. Additional costs that would be incurred on this order would be GHS 6 per unit for shipping

Required - Should Lee Inc. accept the order and deliver the 850 litres of the beverage at GHS30 per litre?

Reference no: EM133171771

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