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Calculate the minimum acceptable selling price per unit

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Question - Chapman Company sells its product for $42 per unit. The company's unit product cost based on the full capacity of 400 000 units is as follows:

Direct materials $8

Direct labour 10

Manufacturing overhead 12

Unit product cost $30

A special order offering to buy 40 000 units has been received from a foreign distributor. The only selling costs that would be incurred on this order would be $6 per unit for shipping. The company has sufficient idle capacity to manufacture the additional units. Two-thirds of the manufacturing overhead is fixed and would not be affected by this order. Assume that direct labour is an avoidable cost in this decision. In negotiating a price for the special order, calculate the minimum acceptable selling price per unit?

Reference no: EM132620777

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