Question
Inc. is a manufacturing company. It has received a special order for 14,000 units of its product ZZ-15. The normal selling price of one unit
Inc. is a manufacturing company. It has received a special order for 14,000 units of its product ZZ-15. The normal selling price of one unit of ZZ-15 is $58 and its unit product cost is $20 as shown below:
The company's manufacturing overhead cost is mostly fixed. Only 30% of manufacturing overhead varies with the number of units of ZZ-15 produced. The special order will require customizing the ZZ-15s for an additional direct materials cost of $6 per unit and an additional direct labor cost of $4 per unit. If Inc. accepts the special order, the company will have to lease special equipment at a cost of $182,000 to do the customization. The company has sufficient excess capacity, and the special order would not affect the company's regular production and sales.
What is the minimum (i.e., the break-even) sales price that the company should charge per unit of the customized ZZ-15 for this special order?
Multiple Choice
$23
$43
$30
$36
\begin{tabular}{|l|l|} \hline Direct materials & $8.00 \\ \hline Direct labor & $2.00 \\ \hline Manufacturing overhead & $10.00 \\ \hline Unit product cost & $20.00 \\ \hline \end{tabular}Step by Step Solution
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