Question

The company has been approached by a customer with a request for a 100-unit special order. What is the minimum per unit sales price that management would accept for this order if the company wishes to increase current profits

Answer 1

The company should fix the price per unit as $9 to increase current profits.

Step-by-step explanation:

Given:

Sales price= $34

Direct materials= $2

Direct labor= $3

Variable overhead= $4

Fixed overhead= $5

The company is capable of producing 5000 units with 80% operating capacity.

5000/0.80-5000=1250 units

Incremental cost= $2+$3+$4

= $9