Farnsworth Television makes and sells portable television sets. Each television
ID: 2482790 • Letter: F
Question
Farnsworth Television makes and sells portable television sets. Each television regularly sells for $220. The following cost data per television are based on a full capacity of 13,000 televisions produced each period: A special order has been received by Farnsworth for a sale of 2,100 televisions to an overseas customer. The only selling costs that would be incurred on this order would be $12 per television for shipping. Farnsworth is now selling 7,100 televisions through regular distributors each period. What should be the minimum selling price per television in negotiating a price for this special order?Explanation / Answer
As Farnsworth is selling only 7100 units but it is producing 13000 units and can accept the special order of supplying 2100 units.
The selling price for these televisions should be all variable costs as the fixed manufacturing overheads will be incurred even if the special order is not accepted; so the selling price would be:$75 + $55 + 75% of $44 + 12 = $175
So, $175 is the correct answer
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