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Tancy Fancy Company has a maximum capacity to produce 20 000 units of serving trays per month. The unit cost is as follows:
Direct material cost: $4Direct Labour cost: $6Fixed Manufacturing overhead: $2Variable manufacturing overhead: $1.20 Currently it produces and sells 15 000 units to its regular customers for $20. Tango Limited has approached Tancy Fancy Company with a business proposal to supply them with 5000 serving trays at a special price of $15 per tray. Required: Problem 1. Should the business proposal be accepted? Show all calculations.
Problem 2. If the business proposal is for 10 000 units, should it be accepted? Show all calculations.
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