Richter Company has a single product called a Wim. The company normally produces

Question

Richter Company has a single product called a Wim. The company normally produces and sells 60,000 Wims each year at a selling price of $40 per unit. The company’s unit costs at this level of activity are given below:

A number of questions relating to the production and sale of Wims are given below. Each question is
independent.

Assume again that Richter Company has sufficient capacity to produce 72,000 Wims each year. The company has an opportunity to sell 12,000 units in an overseas market. Import duties, foreign permits, and other special costs associated with the order would total $4,800. The only selling costs that would be associated with the order would be $3.30 per unit shipping cost. Compute the per unit break-even price on this order. (Do not round intermediate calculations. Round your final answer to 2 decimal places.

Break Even Price per unit:_____

Richter Company has a single product called a Wim. The company normally produces and sells 60,000 Wims each year at a selling price of $40 per unit. The company’s unit costs at this level of activity are given below:

Explanation / Answer

selling price = $ 40

Variable cost = 7.7+13+3.5+3.3 = $ 27.5 per unit

contribution per unit = 40 - 27.5 =$ 12.5 per unit

Break even point (units) =Fixed cost / Contribution per unit

                                            = 4800 / 12.5

                                           = 384 units

**Fixed selling and manufacturing cost will be incurred whether this offer is accepted or not .so they are irrelevant while making decision.

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