Question

Marigold Corporation has the excess manufacturing capacity to fill a special order from Nash, Inc. Using Marigold’s normal costing process, variable costs of the special order would be $17,800 and fixed costs would be $28,910. Of the fixed costs, $4,900 would be for unavoidable overhead costs, and the remainder for rent on a special machine needed to complete the order. What is the minimum price Marigold should quote to Nash?

Answer 1

The minimum price Marigold should quote to Nash is $41,810

Step-by-step explanation:

In order to calculate the minimum price Marigold should quote to Nash we would have to use the following formula:

Minimum price that will be charged = Total avoidable fixed cost + Variable costs

According to the given data we have the following:

Of the fixed costs, $4,900 would be for unavoidable overhead costs, hence, total avoidable fixed cost=$28,910-$4,900=$24,010

Therefore, Minimum price that will be charged=$24,010+$17,800

Minimum price that will be charged=$41,810