Reference no: EM132515507

Point 1: Quentin Products Ltd. produces a single product. The following is a summary of the cost to produce one unit: Cost per unit Direct materials $ 15.00 Direct labour 10.00 Variable overhead 7.50 Variable selling expenses 6.25 Fixed overhead 1.00 Total cost $ 39.75 The fixed overhead cost of $1 per unit is based on the expected production of 25,000 units. If more than 25,000 units are produced, Quentin will incur an additional $125,000 of fixed overhead costs. Fixed selling and administrative expense is $50,000, regardless of the number of units sold. Quentin expects to sell 18,000 units in the coming year.

Point 2: Quentin has been invited to bid on a contract to supply a special order of 10,000 units. Quentin expects to incur only $1 per unit in variable selling expenses to fill the special order; all other variable costs will remain unchanged. The 10,000 units will be added to Quentin's regular production schedule.

Question 1: What is the acceptable minimum price that Quentin should bid?

a) $33.50

b) $45.00

c) $46.00

d) $51.25