Question
The Young Company has gathered the following information for a unit of its most popular product: Direct materials $ 12 Direct labor 6 Overhead (40%
The Young Company has gathered the following information for a unit of its most popular product:
Direct materials | $ | 12 | |
Direct labor | 6 | ||
Overhead (40% variable) | 20 | ||
Cost to manufacture | 38 | ||
Desired markup (50%) | 19 | ||
Target selling price | $ | 57 | |
The above cost information is based on 11,400 units. A distributor has offered to buy 3,100 units at a price of $39 per unit. The distributor claims this special order would not disturb regular sales at $57. Special packaging and other selling expenses would be an additional $0.50 per unit for the special order. How many units of regular sales could be lost before this contract is not profitable?
A) 1,250 units.
B) 3,100 units.
C) 0 units.
D) 1,550 units.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started