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What should the minimum acceptable selling price

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Reference no: EM132562562

Naji Company sells its product for Rs.70 per unit. The company's unit product cost based on the full capacity of 600,000 units is as follows:

Direct materials                         Rs.12

Direct labor                                  15

Manufacturing overhead                    18

Evaluate each situation independently:

Question A. A special order offering to buy 60,000 units has been received from a foreign distributor. The only selling costs that would be incurred on this order would be Rs.9 per unit for shipping. The company has sufficient idle capacity to manufacture the additional units. In negotiating a price for the special order. What should the minimum acceptable selling price per unit be, If it wants to earn Rs.120,000?

Question B. Assume that the company's current production level is 560,000 units, an importer has offered to buy 50,000 units at Rs.40 each. Should it be accepted or not?

Reference no: EM132562562

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