Question

Coronado Industries incurred the following costs for 68000 units: Variable costs $408000 Fixed costs 392000 Coronadohas received a special order from a foreign company for 3500 units. There is sufficient capacity to fill the order without jeopardizing regular sales. Filling the order will require spending an additional $2800 for shipping. If Coronado wants to earn $7000 on the order, what should the unit price be?A) $14.56B) $8.80C) $8.00D) $8.56

Answer 1

Answer:

B) $8.80

Explanation:

Coronado's current variable costs = $408,000 / 68,000 units = $6 per unit

Since this special order wouldn't increase fixed costs, they should not be considered in this calculation.

What has to be considered are the additional $2,800 spent for shipping the goods = $2,800 / 3,500 units = $0.80 per unit

Coronado's total costs for this special order = $6.80 per unit

If it wants to earn a $7,000 profit for this order, that means that they will need to earn a profit of $2 per unit (= $7,000 / 3,500 units).

The unit price for this special order should be = $6.80 + $2 = $8.80