Question

Elfalan Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 42,000 units per month is as follows:

Direct materials	$	43.60
Direct labor	$	8.30
Variable manufacturing overhead	$	1.30
Fixed manufacturing overhead	$	17.70
Variable selling & administrative expense	$	2.20
Fixed selling & administrative expense	$	10.00

The normal selling price of the product is $90.10 per unit.

An order has been received from an overseas customer for 2,200 units to be delivered this month at a special discounted price. This order would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $1.40 less per unit on this order than on normal sales.

Direct labor is a variable cost in this company.

Suppose there is not enough idle capacity to produce all of the units for the overseas customer and accepting the special order would require cutting back on production of 800 units for regular customers. The minimum acceptable price per unit for the special order is closest to: (Round your intermediate calculations to 2 decimal places.)

Garrison 16e Rechecks 2017-09-13

Multiple Choice

• $81.30 per unit

• $69.10 per unit

• $66.62 per unit

• $90.10 per unit

Answer 1

Particulars	Per unit	Total
Units of order		2,200.00
Costs:
Direct materials	43.60	95,920.00
Direct labor	8.30	18,260.00
Variable OH	1.30	2,860.00
Variable selling costs	0.80	1,760.00
Contribution lost		27,760.00
Total costs		146,560.00
Cost per unit		66.62

Answer is $66.62 per unit

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