Question

The Clear Music Company produces and sells a desktop speaker for $100. The company has the capacity to produce 50,000 speakers each period. At capacity, the costs assigned to each unit are as follows:

unit level costs $45

product level costs $15

facility level costs $5

The company has received a special order for 1,000 speakers. If this order is accepted, the company will have to spend $10,000 on additional costs. Assuming that no sales to regular customers will be lost if the order is accepted, at what selling price will the company be indifferent between accepting and rejecting the special order?

A. $100

B. $55

C. $45

D. $65

Answer 1

Step-by-step explanation:

Unit level costs = $45*1000= $45,000

Add: Additional costs = $10,000

Total cost $55,000

Number of units 1000

cost per unit = 55,000/1000 = $55

At $55 company will be between accepting and rejecting the special order