Question

A special order offering to buy 112,000 units has been received from a foreign distributor. The only selling costs that would be incurred on this order would be $19.80 per unit for shipping. The company has sufficient idle capacity to manufacture the additional units. Two-thirds of the manufacturing overhead is fixed and would not be affected by this order. In negotiating a price for the special order, the minimum acceptable selling price per unit should be: (Round your answer to two decimal places.)

Answer 1

Answer: $88.60

Explanation:

In negotiating a price for the special order, the minimum acceptable selling price per unit is calculated below:

Direct materials = $25.80

Direct labor = $31.80

Variable manufacturing overhead = $11.20

Selling cost = $19.80

Total variable cost = $88.60