Your Company manufactures industrial components. Data concerning one of its products are given below:Per UnitS180$29Selling priceDirect materialsDirect laborVariable manufacturing overhead.Fixed manufacturing overhead..Variable selling expenseFixed selling and administrative expense ..$5$21$2S17The above per unit data are based on annual production of 4,000 units of the component when capacity is 8,000 units. The company has received a special, one-time-only order for 500 units of this product.There would be no variable selling expense on this special arder and the total fixed manufacturing overhead and fixed selling and administrative expenses of the company would not be affected by the order.What is the minimum price per unit on the special order below which the company should not go? HINT: What is the breakeven price?

Answered: What is the minimum price per unit on…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Your Company manufactures industrial components. Data concerning one of its products are given below:
Per Unit
S180
$29
Selling price
Direct materials
Direct labor
Variable manufacturing overhead.
Fixed manufacturing overhead..
Variable selling expense
Fixed selling and administrative expense ..
$5
$21
$2
S17
The above per unit data are based on annual production of 4,000 units of the component when capacity is 8,000 units. The company has received a special, one-time-only order for 500 units of this product.
There would be no variable selling expense on this special arder and the total fixed manufacturing overhead and fixed selling and administrative expenses of the company would not be affected by the order.
What is the minimum price per unit on the special order below which the company should not go? HINT: What is the breakeven price?

Expert Solution

Step 1

Since the company's fixed manufacturing overhead and fixed selling and administrative expense would not affected and there's an idle capacity of 4000 units, these costs shall not be considered while determining the cost for the special order.

The question specifically states that there is no variable selling expense for this order and hence minimum price per unit on the special order below which company should not go shall be as follows

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