Stavos Company’s Screen Division manufactures a standard screen for high-definition televisions (HDTVs). The cost per screen is: Variable cost per screen $ 118
Fixed cost per screen 34 *
Total cost per screen $ 152
*Based on a capacity of 820,000 screens per year.

Part of the Screen Division’s output is sold to outside manufacturers of HDTVs and part is sold to Stavos Company’s Quark Division, which produces an HDTV under its own name. The Screen Division charges $194 per screen for all sales.

The net operating income associated with the Quark Division’s HDTV is computed as follows:

Selling price per unit $ 584
Variable cost per unit:
Cost of the screen $ 194
Variable cost of electronic parts 234
Total variable cost 428
Contribution margin 156
Fixed costs per unit 82 *
Net operating income per unit $ 74
*Based on a capacity of 150,000 units per year.

The Quark Division has an order from an overseas source for 5,300 HDTVs. The overseas source wants to pay only $408 per unit.

Required:

1. Assume both the Screen Division and the Quark Division have idle capacity. Under these conditions, what is the financial advantage (disadvantage) for the company as a whole (on a per unit basis) if the Quark Division rejects the $408 price?

2. Assume the Quark Division has idle capacity but that the Screen Division is operating at capacity and could sell all of its screens to outside manufacturers. Under these conditions, what is the financial advantage (disadvantage) for the company as a whole (on a per unit basis) if the Quark Division accepts the $408 unit price?