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Determine the minimum acceptable selling price per unit

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Reference no: EM132862888

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 labor $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 labor is an avoidable cost in this decision. In negotiating a price for the special order, determine the minimum acceptable selling price per unit?

a) $30

b) $28

c) $36

d) $32

Reference no: EM132862888

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