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Questions 3 and 4 refer to the following: The Melville Company produces a single product called a Pong. Melville has the capacity to produce 60,000
Questions 3 and 4 refer to the following: The Melville Company produces a single product called a Pong. Melville has the capacity to produce 60,000 Pongs each year. If Melville produces at capacity, the per unit costs to produce and sell one Pong are as follows: The regular selling price for one Pong is $80. A special order has been received by Melville from Mowen Company to purchase 6,000 Pongs during the year. If this special order is accepted, the variable selling expense will be reduced by 75%. However, Melville will have to purchase a specialized machine to engrave the Mowen name on each Pong in the special order. This machine will cost $9,000 and it will have no use after the special order is filled. All other fixed costs will be unaffected by the special order. Assume that Melville can sell 54,000 units of Pongs to regular customers during the year. What is the relevant cost per unit of producing the special order for Mowen? a. $51.50 b. $49.00 c. $37.00 d. $38.50
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