MSI has been approached by a fourth-grade teacher from Portland about the possib

Question

MSI has been approached by a fourth-grade teacher from Portland about the possibility of creating a specially designed game that would be customized for her classroom and environment. The teacher would like an educational game to correspond to her classroom coverage of the history of the Pacific Northwest, and the state of Oregon in particular. MSI has not sold its products directly to teachers or school systems in the past, but its Marketing Department identified that possibility during a recent meeting.

The teacher has offered to buy 1,000 copies of the CD at a price of $5 each. MSI could easily modify one of its existing educational programs about U.S. history to accommodate the request. The modifications would cost approximately $500. A summary of the information related to production of MSI’s current history program follows:   

4. Suppose that MSI is operating at full capacity. To accept the special order, it would have to reduce production of the history program. Compute the special order price at which MSI would be indifferent between accepting or rejecting the special order. (Round your answer to 2 decimal places.)

    Direct materials $ 1.50 Direct labor 0.60 Variable manufacturing overhead 2.25 Fixed manufacturing overhead 2.00 Total cost per unit $ 6.35 Sales price per unit $ 12.00

Explanation / Answer

Special order price per unit = Sales price per unit + Modifications cost per unit = 12+(500/1000) = $12.50

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.