Question

Eley Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 59,000 units per month is as follows: Direct materials $52.10 Direct labor $10.00 Variable manufacturing overhead $3.00 Fixed manufacturing overhead $21.10 Variable selling & administrative expense $5.60 Fixed selling & administrative expense $27The normal selling price of the product is $124.10 per unit.An order has been received from an overseas customer for 3,900 units to be delivered this month at a special discounted price. This order would have no effect on the company's normal sales and would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $3.10 less per unit on this order than on normal sales.Direct labor is a variable cost in this company.Suppose there is not enough idle capacity to produce all of the units for the overseas customer and accepting the special order would require cutting back on production of 1,650 units for regular customers. The minimum acceptable price per unit for the special order is closest to:$124.10$101.70$69.10$90.19

Answer 1

Answer:

$90.19

Explanation:

Direct material = 52.10

Direct labour = 10

Variable manufacturing = 3

Fixed manufacturing = 21.10

Variable Admin expenses = 5.60

Fixed admin expenses = 27

Selling price = 124.1

Profit=5.3

Contribution per unit = 53.4

New order = 3900

Direct material 52.1

Direct labour =10

Variable manufacturing = 3

Variable admin expenses = 2.5

total unit variable cost = 67.6

total variable cost =3900*67.6 = 263640

Loss contribution =1650*53.4 =88110

=263640+8810 =351750

351750/3900

=$90.19