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Pontotoc Industries manufactures a product that is used as a subcomponent by other manufacturers. It has the following price and cost structure: Selling price
Pontotoc Industries manufactures a product that is used as a subcomponent by other manufacturers. It has the following price and cost structure: Selling price Costs Direct materials $895 Direct labor $350 230 Variable manufacturing overhead 48 Fixed manufacturing overhead 75 Variable shipping Fixed selling and administrative 12 40 Operating margin 755 $140 Pontotoc received a special, one-time order for 2,500 units of its product. However, Pontotoc has an alternative use for the capacity that will result in a contribution of $30,000 (Note: this lost contribution margin is a relevant cost). What is the minimum unit price for this special order? (How much do they need to charge to cover all relevant costs?)
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