A company is currently operating at 70% capacity producing 12,000 units. Cost in

Question

A company is currently operating at 70% capacity producing 12,000 units. Cost information relating to this current production is shown in the following table: Sales price Direct material Direct labor Variable overhead Fixed overhead Per Unit $21 S6.50 $4.25 $2.40 $0.80 The company has been approached by a customer with a request for a special order for 5,000 units. A) Does the company have the capacity to do the special order? Show details and analysis to earn the points, not just yes or no. (3 Points) B) What is the minimum per unit sales price that management would accept for this order if the company wishes to increase current profits? Show details to earn the points. (4 Points)

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer and please give thumbs up   Statementshowing Computations Paticulars Amount A) Units at 70 % capacity              12,000.00 Units at 100 % capacity = 12000/70% * 100%              17,142.86 Excess Capacity Available =17,142.86 - 12000                5,142.86 Yes company has excess capacity available to do special order B) Per Unit Direct Materials                         6.50 Direct Labour                         4.25 Variable Overhead                         2.40 Minimum sales price per unit                      13.15 Thus minimu sales price is $13.15 per unit

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