Question

Cooper Co. produced 70,000 units and incurred $168,000 of variable costs and $156,800 of fixed costs last year. Cooper has received a special order from a foreign customer for 3,000 units. Cooper has sufficient capacity to fill the order without jeopardizing regular sales. Cooper would incur $2,520 in additional shipping charges to fulfill this order. If Cooper wants to break even on this order, what should the unit selling price be?

Answer 1

The unit selling price be $3.24

Step-by-step explanation:

For computing the unit selling price, first we have to calculate the variable cost per units and increment shipping charges per unit which is shown below:

Variable cost per unit = (Total variable cost) ÷ (number of units produced)

= ($168,000) ÷ (70,000 units)

= $2.4

And, the increment shipping charges per unit = (Additional shipping charges) ÷ (special order units)

= ($2,520) ÷ (3,000 units)

= $0.84

Now add these two to find out the answer

= $2.4 + $0.84

= $3.24