Jack\'s Personal Devices makes and sells hand-held computers. Each computer regu

Question

Jack's Personal Devices makes and sells hand-held computers. Each computer regularly sells for $200. The following cost data per computer are based on a full capacity of 12,000 computers produced each period: Direct materials. $75; Direct labour, $55; Factory Overhead (75% variable, 25% unavoidable fixed), $48. A special order has been received by Jack's for a sale of 2,500 computers to an overseas customer. The only selling costs that would be incurred on this order would be $10 per computer for shipping. Jack's is now selling 7,200 computers through regular distributors each period. What should be the minimum selling price per computer in negotiating a price for this special order?

Explanation / Answer

Computation of Contribution Per Computer through Regular Distributor Particular Amount Selling Price $200.00 Variable Cost Direct Material $75.00 Direct Labour $55.00 Variable Factory Overhead ( $48X 75%) $36.00 $166.00 Contribution per Computor $34.00 Computation of Minimum Selling Price per Computor for this special order Particular Amount Variable Cost per Computer $166.00 Contribution per Computor Lost $34.00 Additional Selling Cost $10.00 Minimum Selling Price per Computer $210.00

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