Exam 4 Chs1012 150 pts Due June 16 0 Help SaveExl Submi TB M

Exam #4 (Chs10.12) 150 pts. Due: June 16 0 Help Save&Exl; Submi TB MC Qu. 12-138 Elfalan Corporation produces a single product. 15 an Corporation produces a single product. The cost of groducing and seling a single unit of this product at the company\'s normal activity level of 60,000 units per month is as follows Direct materiala Direct labor Variablo manufacturing overhead Fixed manufacturing overhoad Variable selling& adninistrative expense Fixed selling& adninistrative expense $52.60 10.10 s 3.10 21.30 5.80 528.00 The normal selling price of the product is $126 10 per unit An order has been received frorm an overseas customer for 4,000 unts to be delivered this month at a special discounted price. This order would not change the total amount of the company\'s fxed costs. The variable seling and administrative expense would be $3.20 less per unit on this order than on normal sales Direct labor is a variable cost in this corrpany Suppose there is not enough idle capacity to produce al of the units for the overseas customer and accepting the special order would require cutting back on production of 1,700 units for regular customers. The minimum acceptable price per unit for the special order is closest to: (Round your intermediate calculations to 2 decimal places) Mutiple Choice $91 56 per unit or returned 103408 paper chps Fe F6 F5

Solution

Solution:

As accepting special order would result in loss of sale of 1700 units of regular customer then company can sell 2300 units at relevant variable cost and 1700 units at regular price less avoidable variable selling cost per unit.

Relevant cost per unit = $52.60 + $10.10 + $3.10 + $5.80 - $3.20 = $68.40

Required price fro 1700 units = $126.10 - $3.20 = $122.90

Required minimum revenue on 4000 units of special order = (2300 * $68.40) + (1700 * $122.90) = $366,250

Minimum acceptable price per unit of special order = $366,250 / 4000 = $91.56 per unit

Hence first option is correct.