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Determine what is the minimum sales price per unit

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Reference no: EM132535908

Tarind Corporation manufactures shirts, and it is considering whether or not it should accept a special order for 12,000 shirts. The normal selling price of a shirt is $69 and its unit product cost is $20 as shown below:

Direct materials                       $8.00

Direct labor                           $2.00

Manufacturing overhead          $10.00

Unit product cost                   $20.00

  • Most of the manufacturing overhead is fixed; however, 30% of it is variable with respect to the number of shirts produced. The special order will require customizing the shirts for the customer with an additional direct materials cost of $6 per shirt and an additional direct labor cost of $5 per shirt. If it accepts this order, the company will have to rent special equipment to handle the shirt customization at a cost of $72,000. The order would have no effect on the company's regular sales and it could be fulfilled using the company's existing capacity without affecting any other order.

Question 1: What is the minimum (i.e., the break-even) sales price per unit that the company should charge for this special order?

Multiple Choice

Option 1: $24

Option 2: $37

Option 3: $31

Option 4: $30

Reference no: EM132535908

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