Making a decision about special pricing. The Brenner Company produces a part used in automobiles. Annual production is 200,000 units, each of which regularly sells for $100. The standard cost sheet data is shown below.
Nonmanufacturing costs are $10 per unit for variable costs and $12.50 per unit for fixed costs.

A foreign manufacturer needs 20,000 units and offers $60 per unit plus shipping costs. None of these units would be sold in the Brenner Company’s normal market.
The company’s president is opposed to accepting the order. He does not want to lose $1 on each unit. The cost accountant thinks that the company should accept the offer.
Instructions 1. Prepare the two special product pricing analyses used by the cost accountant. On the second analysis, round off the figures to thousands of dollars. NOTE: Although the variable manufacturing costs applicable to the units in the special order may be higher or lower than such costs for the standard units, assume that these costs will be the same for all units.
2. Explain whether the special order should be accepted or rejected and why.

Transcribed Image Text:

Materials Labor (2 hr x $8.75 per hr) Manufacturing Overhead $20.00 17.50 Variable (1 hr x $7.50 per hr) $7.50 Fixed (1 hr x $16 per hr) Total Standard Cost per Unit 16.00 23.50 $61.00