Landor Appliance Company makes and sells electric fans. Each fan regularly sells

Question

Landor Appliance Company makes and sells electric fans. Each fan regularly sells for $42. The following cost data per fan is based on a full capacity of 150,000 fans produced each period. Direct materials............................................................... $9 Direct labor..................................................................... $10 Manufacturing overhead (70% variable and 30% unavoidable fixed)................ $10 A special order has been received by Landor for a sale of 25,000 fans to an overseas customer. The only selling costs that would be incurred on this order would be $4 per fan for shipping. Landor is now selling 120,000 fans through regular channels each period. What should Landor use as a minimum selling price per fan in negotiating a price for this special order?

Explanation / Answer

Direct materials = 9 Direct labor =10 Variable manufacturing overhead (10*0.70) = 7 Variable selling cost = 4 Minimum selling price would be = 9 + 10 + 7+ 4 = 30

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