Use the following data for the next 2 questions:
A manufacturer operating with excess capacity has been asked to fill a special order at $7.25 per unit. The regular price is $10 per unit. No other use of the currently idle capacity can be found. The manufacturer's usual variable costs per unit are $3.50 for direct materials, $2.00 for direct labor, $1.00 for variable overhead, and $0.50 for sales commission. No sales commission would be paid on this special order. The average fixed overhead cost per unit is $0.25.
-Under the general decision rule, the minimum price per unit for this special order is
A) $7.25
B) $6.50
C) $7.00
D) $7.50

Question

Quizplus · Accepted Answer

The minimum price should cover all variable costs: $3.50 (materials) + $2.00 (labor) + $1.00 (overhead) = $6.50. Sales commission and fixed costs are not relevant for this decision.

Use the Following Data for the Next 2 Questions