Elfalan Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 80,000 units per month is as follows: The normal selling price of the product is $67.80 per unit.
An order has been received from an overseas customer for 3,000 units to be delivered this month at a special discounted price. This order would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $1.90 less per unit on this order than on normal sales.
Direct labor is a variable cost in this company.
Suppose there is not enough idle capacity to produce all of the units for the overseas customer and accepting the special order would require cutting back on production of 1,600 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.)
A) $62.00 per unit
B) $50.70 per unit
C) $67.80 per unit
D) $50.31 per unit

Question

Elfalan Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 80,000 units per month is as follows:  The normal selling price of the product is $67.80 per unit.
An order has been received from an overseas customer for 3,000 units to be delivered this month at a special discounted price. This order would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $1.90 less per unit on this order than on normal sales.
Direct labor is a variable cost in this company.
Suppose there is not enough idle capacity to produce all of the units for the overseas customer and accepting the special order would require cutting back on production of 1,600 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.)
A) $62.00 per unit 
B) $50.70 per unit 
C) $67.80 per unit 
D) $50.31 per unit

Quizplus · Accepted Answer

Variable cost on normal sales:
 11eacbfc_c646_b099_8ffe_efa54a396f09_TB7552_00 11eacbfc_c646_d7aa_8ffe_cf861ecef0cf_TB7552_00 Variable cost on special order:
 11eacbfc_c646_d7ab_8ffe_634837233a6d_TB7552_00 Minimum acceptable price:
 11eacbfc_c646_d7ac_8ffe_8f6057398f06_TB7552_00

Elfalan Corporation Produces a Single Product