Mckerchie Inc. manufactures industrial components. One of its products, which is used in the construction of industrial air conditioners, is known as G62. Data concerning this product are given below: The above per unit data are based on annual production of 9,000 units of the component. Direct labor can be considered to be a variable cost.
-The company has received a special,one-time-only order for 300 units of component G62.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 Mckerchie has excess capacity and can fill the order without cutting back on the production of any product,what is the minimum price per unit on the special order below which the company should not go?
A)$26
B)$67
C)$55
D)$160

Question

Mckerchie Inc. manufactures industrial components. One of its products, which is used in the construction of industrial air conditioners, is known as G62. Data concerning this product are given below:  The above per unit data are based on annual production of 9,000 units of the component. Direct labor can be considered to be a variable cost.
-The company has received a special,one-time-only order for 300 units of component G62.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 Mckerchie has excess capacity and can fill the order without cutting back on the production of any product,what is the minimum price per unit on the special order below which the company should not go?
A)$26 
B)$67 
C)$55 
D)$160

Quizplus · Accepted Answer

The selling price for the special order would have to at least cover the variable cost per unit of $26.
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