Question

Jordan Company budgeted sales of 400,000 calculators at $40 per unit last year. Variable manufacturing costs were budgeted at $19 per unit, and fixed manufacturing costs at $10 per unit. A special order for 40,000 calculators at $23 each was received by Jordan in March. Jordan has sufficient plant capacity to manufacture the additional quantity without incurring any additional fixed manufacturing costs; however, the production would have to be done on an overtime basis at an estimated additional cost of $3 per calculator. Acceptance of the special order would not affect Jordan's normal sales. What would be the minimum price Jordan would accept for this special order?

Answer 1

The minimum price Jordan would accept for this special order is $22

Explanation:

Special order 40,000 calculators

Order price $23

Total order price = 40,000× $23  = 920,000

$Total order price = 40,000× 23 = 920,000$

Note : according to the question.,there is no need for fixed manufacturing costs

Total cost Estimation = (Variable cost +estimated additional cost )×T.units

 = (19 + 3) = 22 ×40,000 units = 880,000

$= (19 + 3) = 22 ×40,000 units = 880,000$

profit from this order = 23-22 = 1 per unit ×40,000 = 40,000

The minimum price Jordan would accept for this special order is $22