and seiling a single unit of this product at the company\'s normal activity leve

Question

and seiling a single unit of this product at the company's normal activity level of 33,000 unts per month is as follows The cost of $2.90 $240 The normal selling price of the product in $51.60 per unit rom an oversess customer for 2,500 units to be delivered this month at a special discounted price. This onder would not change the total amout of the compeny's d costs. The variabl expense wouid be $0.20 less per unit on this order than on normal sales seling and Suppose there is not enough idle capacity to produce all of the units for the overseas customer and accepting the special onder would nequire cutting back on production of 250 unts for segular customers. The minimum acceptable price per unit for the special order is closest to O $5160 O $3560 O $3200 MacBook Ai 4 8 2 3

Explanation / Answer

Contribution margin of exisiting product=selling price-variable costs
variable costs=(23+7.3+2.9+2.4)=35.6
selling price=51.6
CM=51.6-35.6=16
250 units for regular customer margin=250*16=4000
Total cost of special order=4000+(special order units*var cost for sepecial order)
=4000+(2500*(35.6-0.2))
=92500
Min acceptable price per unit= Total cost of special order/total units
=92500/2500
=37

It is option D

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