The following information relates to a product produced by Victoria Ltd Direct m

Question

The following information relates to a product produced by Victoria Ltd Direct materials Direct labour Variable overheads Fixed overheads Unit cost $10 8 $31 Fixed selling costs are $1,000,000 per year. Variable selling costs of $4 per unit sold are added to cover the transportation cost. Although production capacity is 600,000 units per year, Victoria expects to produce only 400,000 units next year. The product normally sells for $40 each. A customer has offered to buy 60,000 units for $30 each. The customer will pay the transportation charge on the units purchased. Victoria's incremental cost per unit associated with the special order is Select one $23. $27 $31 $35

Explanation / Answer

Solution:

Victorial incremental cost per unit associated with special order is = Variable manufacturing cost = Direct material + Direct labor + Variable overhead = $10 + $7 + $6 = $23 per unit

Hence first option is correct.

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