Elfalan Corporation produces a single product. The cost of producing and selling

Question

Elfalan Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 43,000 units per month is as follows:

The normal selling price of the product is $92.10 per unit.

An order has been received from an overseas customer for 2,300 units to be delivered this month at a special discounted price. This order would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $1.50 less per unit on this order than on normal sales.

Direct labor is a variable cost in this company.

Suppose there is not enough idle capacity to produce all of the units for the overseas customer and accepting the special order would require cutting back on production of 850 units for regular customers. The minimum acceptable price per unit for the special order is closest to: (Round your intermediate calculations to 2 decimal places.)

Garrison 16e Rechecks 2017-09-13

Multiple Choice

$69.10 per unit

$68.03 per unit

$92.10 per unit

$82.50 per unit

Direct materials $ 44.10 Direct labor $ 8.40 Variable manufacturing overhead $ 1.40 Fixed manufacturing overhead $ 17.90 Variable selling & administrative expense $ 2.40 Fixed selling & administrative expense $ 11.00

Explanation / Answer

Per unit Total 2300 units Direct materials 44.1 101430 Direct labor 8.4 19320 Variable manufacturing overhead 1.4 3220 Variable selling & administrative expense 0.9 2070 Loss in contribution margin 30430 =850*(92.1-44.1-8.4-1.4-2.4) Total Incremental costs 156470 Minimum acceptable price per unit = 156470/2300= $68.03 per unit

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.