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Sergeeva-Olga [200]
3 years ago
13

Minor Electric has received a special one-time order for 600 light fixtures (units) at $8 per unit. Minor currently produces and

sells 3,000 units at $9.00 each. This level represents 75% of its capacity. Production costs for these units are $9.00 per unit, which includes $6.00 variable cost and $3.00 fixed cost. To produce the special order, a new machine needs to be purchased at a cost of $550 with a zero salvage value. Management expects no other changes in costs as a result of the additional production. If Minor wishes to earn $850 on the special order, the size of the order would need to be:
Business
1 answer:
chubhunter [2.5K]3 years ago
6 0

Answer:

700 units

Explanation:

Calculation for the what the size of the order will be.

Using this formula

Unit to sell= Total additional fixed costs + desired profit / Contribution margin per unit=

Let plug in the formula

Units to sell=$550 + $850 / (8-6)

Units to sell= $1,400/2

Units to sell=700 units

Therefore the size of the order will be 700 units

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