PowerDrive, Inc. produces a hard disk drive that sells for $175 per unit. The cost of producing 25,000 drives in the prior year was:
Direct material
$625,000
Direct labor
375,000
Variable overhead
125,000
Fixed overhead
1,500,000
Total cost
$2,625,000
At the start of the current year, the company received an order for 3,200 drives from a computer company in China. Management of PowerDrive has mixed feelings about the order. On the one hand they welcome the...