A company is currently operating at 80% capacity producing 5,000 units. Current cost information relating to this production is shown in the table below: The company has been approached by a customer with a request for a 100-unit special order. What is the minimum per unit sales price that management would accept for this order if the company wishes to increase current profits?
A) Any amount over $34 per unit.
B) Any amount over $20 per unit.
C) Any amount over $14 per unit.
D) Any amount over $9 per unit.
E) Any amount over $5 per unit.

Question

A company is currently operating at 80% capacity producing 5,000 units. Current cost information relating to this production is shown in the table below:  The company has been approached by a customer with a request for a 100-unit special order. What is the minimum per unit sales price that management would accept for this order if the company wishes to increase current profits?
A) Any amount over $34 per unit. 
B) Any amount over $20 per unit. 
C) Any amount over $14 per unit. 
D) Any amount over $9 per unit. 
E) Any amount over $5 per unit.

Quizplus · Accepted Answer

5,000/0.80 − 5,000 = 1,250 unit capacity available
$2 + $3 + $4 = $9 incremental costs

A Company Is Currently Operating at 80% Capacity Producing 5,000