A Manufacturer Operating with Excess Capacity Has Been Asked to Fill

question 6

Multiple Choice

A manufacturer operating with excess capacity has been asked to fill a special order at $7.25 per unit. No other use of the currently idle capacity can be found. The manufacturer's usual variable costs per unit are $3.50 for direct materials, $1.50 for direct labour, $1.50 for variable overhead, and $0.50 for sales commission. No sales commission would be paid on this special order. The average overhead per unit is $0.25.
Under the general decision rule, the minimum price per unit for this special order is:

• A) $7.25
• B) $6.50
• C) $7.00
• D) $7.50

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Definitions:

Human Capital

The combined abilities, expertise, and non-material assets possessed by people that can generate economic benefits for themselves, their companies, or society.

Ethnic Minorities

Groups within a community which differ from the majority population in race, national or cultural origin, and often have distinct social and economic practices.

Discrimination

Unfair treatment of individuals based on characteristics such as race, gender, age, or sexual orientation.

Average Wages

The mean wage calculated by dividing the total wage bill by the number of wage earners; it represents the midpoint of wage distribution in a given area or sector.