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 500 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.However,assume that Younes has no excess capacity and this special order would require 30 minutes of the constraining resource,which could be used instead to produce products with a total contribution margin of $10,000.What is the minimum price per unit below which the company should not accept the special order?
A) $67 per unit
B) $103 per unit
C) $20 per unit
D) $83 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 500 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.However,assume that Younes has no excess capacity and this special order would require 30 minutes of the constraining resource,which could be used instead to produce products with a total contribution margin of $10,000.What is the minimum price per unit below which the company should not accept the special order?
A) $67 per unit 
B) $103 per unit 
C) $20 per unit 
D) $83 per unit

Quizplus · Accepted Answer

11ea7761_1613_c987_81a5_1b1055092349_TB2580_00 The selling price for the special order would have to cover both the $47 variable cost per unit and the opportunity cost of $10,000.
 11ea7761_1613_f098_81a5_cb84687100ce_TB2580_00