8) Rasmussen Company manufactures greeting cards and has excess capacity. Curren

Question

8) Rasmussen Company manufactures greeting cards and has excess capacity. Current information for the company includes: selling price per greeting card- $3.00; variable manufacturing cost per greeting card = $0.50, fixed manufacturing cost per greeting card = S0.25; variable selling and administrative cost per greeting card $0.10. Rasmussen Company receives an offer to produce 10,000 units for a special order (one-time opportunity). What is the minimum sales price the company should accept for the special order? A) $3.00 B) $0.50 C) 50.85 D) S0.60

Explanation / Answer

If manufactures has excess capacity then minimum selling price would be variable cost per unit.

Minimum selling price per unit= Variable manufacturing cost per unit+Variable selling & administrative per unit

                                                 = 0.50+0.10

Minimum selling price per unit = 0.60

so answer is d) $0.60

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