Answered

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Dockwiller Inc. manufactures industrial components. One of its products, which is used in the construction of industrial air conditioners, is known as D53. Data concerning this product are given below: The above per unit data are based on annual production of 8,000 units of the component. Direct labor is a variable cost. The company has received a special, one-time-only order for 500 units of component D53. There would be no variable selling expense on this special order and the total fixed manufacturing overhead and fixed selling and administrative expenses of the company would not be affected by the order. Assuming that Dockwiller has excess capacity and can fill the order without cutting back on the production of any product, what is the minimum price per unit below which the company should not accept the special order

Sagot :

Parrain

Answer: $30

Explanation:

The company has excess capacity which means that we do not have to worry about opportunity costs.

We also do no have to worry about fixed costs and selling expenses.

The only relevant cost is therefore the variable costs:

= Direct labor + Direct material + Variable manufacturing overhead

= 26 + 3 + 1

= $30

Below $30 would mean incurring a loss.

View image Parrain
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