Younes Inc. manufactures industrial components. One of its products, which is used in the construction of industrial air conditioners, is known as P06. Data concerning this product are given below:
The above per unit data are based on annual production of 4,000 units of the component. Assume that direct labor is a variable cost.
-The company has received a special,one-time-only order for 400 units of component P06.There would be no variable selling expense on this special order and the total fixed manufacturing overhead and fixed selling and administrative expenses of the company would not be affected by the order.Assuming that Younes has excess capacity and can fill the order without cutting back on the production of any product,what is the minimum price per unit below which the company should not accept the special order?
A) $47 per unit
B) $83 per unit
C) $63 per unit
D) $220 per unit

Question

Younes Inc. manufactures industrial components. One of its products, which is used in the construction of industrial air conditioners, is known as P06. Data concerning this product are given below:
  The above per unit data are based on annual production of 4,000 units of the component. Assume that direct labor is a variable cost.
-The company has received a special,one-time-only order for 400 units of component P06.There would be no variable selling expense on this special order and the total fixed manufacturing overhead and fixed selling and administrative expenses of the company would not be affected by the order.Assuming that Younes has excess capacity and can fill the order without cutting back on the production of any product,what is the minimum price per unit below which the company should not accept the special order?
A) $47 per unit 
B) $83 per unit 
C) $63 per unit 
D) $220 per unit

Quizplus · Accepted Answer

The selling price for the special order would have to at least cover the variable cost per unit of $47.
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