Ellis Television makes and sells portable televisions. Each television regularly sells for £210. The following cost data per television is based on a full capacity of 10,000 televisions produced each period:$\begin{array}{lrr}
\text { Direct materials } &£80\
\text { Direct labour } &£60\
\text { Manufacturing overhead ( $ 70 \% $ variable and $ 30 \% $ unavoidable fixed) } &£40\
\end{array}$

Ellis has received a special order for a sale of 2,000 televisions to an overseas customer. The only selling costs that would be incurred on this order would be £6 per television for shipping. Ellis is now selling 6,000 televisions through regular channels each period. What should be the minimum selling price per television in negotiating a price for this special order

A)£174
B)£168
C)£210
D)£180

Question

Ellis Television makes and sells portable televisions. Each television regularly sells for £210. The following cost data per television is based on a full capacity of 10,000 televisions produced each period:$\begin{array}{lrr}
  \text { Direct materials } &£80\
 \text { Direct labour } &£60\
 \text { Manufacturing overhead ( $ 70 \% $ variable and $ 30 \% $ unavoidable fixed) } &£40\
\end{array}$

Ellis has received a special order for a sale of 2,000 televisions to an overseas customer. The only selling costs that would be incurred on this order would be £6 per television for shipping. Ellis is now selling 6,000 televisions through regular channels each period. What should be the minimum selling price per television in negotiating a price for this special order

A)£174
B)£168
C)£210
D)£180

Quizplus · Accepted Answer

To determine the minimum selling price per television for the special order, we need to calculate the incremental cost of producing and shipping 2,000 additional televisions.

Total cost of producing 10,000 televisions = £900,000 (10,000 x £90)
Incremental cost of producing additional 2,000 televisions = £180,000 (2,000 x £90)
Cost per television for special order = (£180,000 + (£6 x 2,000))/2,000 = £93

Therefore, the minimum selling price per television for the special order should be £93 + £6 (shipping cost) = £99.

Since the regular selling price is £210, the special order should not be sold below the regular selling price.

Therefore, the minimum selling price per television in negotiating for the special order should be £210.

However, this answer is not one of the given choices. The closest answer is A (£174), which is lower than the regular selling price and the calculated minimum price for the special order. Therefore, the best choice is not provided in the given options.

Ellis Television Makes and Sells Portable Televisions Ellis Has Received a Special Order for a Sale of Sells