Reference no: EM131539928

Question: A company receives a special order for 200 units that requires stamping the buyer's name on each unit, yielding an additional fixed cost of $400 to its normal costs. Without the order, the company is operating at 75% of capacity and produces 7,500 units of product at the following costs:

Direct materials . . . . . . . . . . . . . . . . . . . . . . . $37,500

Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000

Overhead (30% variable) . . . . . . . . . . . . . . . . 20,000

Selling expenses (60% variable) . . . . . . . . . . . 25,000

The special order will not affect normal unit sales and will not increase fixed overhead and selling expenses. Variable selling expenses on the special order are reduced to one-half the normal amount. The price per unit necessary to earn $1,000 on this order is

(a) $14.80,

(b) $15.80,

(c) $19.80,

(d) $20.80, or

(e) $21.80.