Answer the following question(s)using the information below.Welch Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers.Welch Manufacturing has excess capacity.The following per unit data apply for sales to regular customers:

-For Welch Manufacturing, what is the minimum acceptable price of this special order?
A)$110
B)$140
C)$170
D)$240
E)$255

Question

Answer the following question(s)using the information below.Welch Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers.Welch Manufacturing has excess capacity.The following per unit data apply for sales to regular customers:
 
-For Welch Manufacturing, what is the minimum acceptable price of this special order?
A)$110 
B)$140 
C)$170 
D)$240 
E)$255

Quizplus · Accepted Answer

Since Welch Manufacturing has excess capacity, any revenue generated from this special order would be considered additional profit. Therefore, the minimum acceptable price for this special order would be the variable cost per unit plus a small amount of additional profit. The variable cost per unit is $70 ($45 + $20 + $5), so adding a small amount of additional profit would make the minimum acceptable price around $110. Option A is the closest to this calculated amount, so it is the best choice.

Answer the Following Question(s)using the Information Below