Hobbs Electronics Makes and Sells Portable DVD Players Hobbs Receives a Special Order for 100 DVD Players

question 1

Multiple Choice

Hobbs Electronics makes and sells portable DVD players.Each DVD player has a selling price of $100.The following cost data per DVD player is based on a capacity of 5,000 DVD players per period. $$\begin{array} { l r } \text { Direct Material } & \$ 30 \\\text { Direct Labor } & \$ 20 \\\text { Manufacturing Overhead } \\\text { (70\% variable; } 30 \% \text { fixed) } & \$ 10\end{array}$$ Hobbs receives a special order for 100 DVD players.The only additional costs Hobbs will incur are $2 shipping charges per item.Hobbs has sufficient idle capacity to produce the additional DVD players.What is the minimum price Hobbs should charge per DVD player for the special order?

• A)$60
• B)$59
• C)$57
• D)$55
• E)$62

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Definitions:

Disposable Income

The sum of funds households can allocate for expenditure and saving once income taxes are deducted.

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Per Capita Income

The average income earned per person in a certain area, calculated by dividing the area's total income by its total population.