Question

In: Accounting

Swifty Corporation incurred the following costs for 76000 units: Variable costs $456000 Fixed costs 392000 Swifty...

Swifty Corporation incurred the following costs for 76000 units:

Variable costs	$456000
Fixed costs	392000

Swifty has received a special order from a foreign company for 2000 units. There is sufficient capacity to fill the order without jeopardizing regular sales. Filling the order will require spending an additional $1600 for shipping.

If Swifty wants to break even on the order, what should the unit sales price be?

$11.16

$6.80

$11.96

$6.00

Expert Solution

Answer :-

The Correct Answer is Option - $6.80.

Explanation :-

First we find out Variable cost per unit -

Variable Cost per unit = Total variable cost / No. Of units

Total variable cost = $456,000

No. of units = 76,000 units

Variable Cost per unit = $456,000 / 76,000 units

Variable Cost per unit = $6 pet unit

Now in question it give that , Swifty company received special order of 2,000 units and required additional spending of $1,600 for shipping.

We would not take the Fixed cost of $392,000 to find out the sale price as there is sufficient capacity to fill the order without jeopardizing regular sales. So we only take Variable Cost per unit to calculate the sales price.

Additional Cost per unit = Additional Cost / No. of units in special order.

Additional Cost per unit = $1,600 / 2,000 units

Additional Cost per unit = $0.80 per units

If Swifty wants to break even on the order , then

Unit sales price = Variable Cost per unit + Additional Cost per unit

Unit sales price = $6 + $0.80

Unit Sales Price = $6.80 per unit

ekkarill92 answered 2 years ago

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