Question

Farnsworth Television makes and sells portable television sets.Each television regularly sells for $200. The following cost data per television are based on a full capacity of 12,000 televisions produced each period:* Direct materials = $75* Direct labor = $55* Manufacturing overhead (75% variable and 25% unavoidable fixed) $48Farnsworth has received a special order for a sale of 2,500 televisions to an overseas customer. The only selling costs that would be incurred on this order would be $10 per television for shipping.Farnsworth is now selling 7,200 televisions through regular distributors each period.What should be the minimum selling price per television in negotiating a price for this special order?
1) $2002) $1663) $1784) $176

Answer 1

Answer:

The correct answer is $176.

Explanation:

Giving the following information:

The following cost data per television are based on full capacity of 12,000 televisions produced each period:* Direct materials = $75* Direct labor = $55* Manufacturing overhead (75% variable and 25% unavoidable fixed) $48.

The only selling costs that would be incurred on this order would be $10 per television for shipping.

Because it is a special offer and there is unused capacity we will not have into account the fixed costs.

Unitary costs= 75 + 55 + (48*0.75) + 10= $176

The minimum price is the one that covers the variable cost. In this case $176.

Minimum price= $176