Blue Chip Company Sells Gears for $9 Per Unit An Order to Purchase 4,000 Gears Was Recently Received from Cost

question 85

Multiple Choice

Blue Chip Company sells gears for $9 per unit.The unit cost of each gear follows: $$\begin{array} { l r } \text { Direct materials } & \$ 1.50 \\\text { Direct labor } & 2.20 \\\text { Manufacturing overhead } & 2.10 \\\text { Total } & \$ 5.80\end{array}$$ An order to purchase 4,000 gears was recently received from a new customer.There is enough capacity to fill the order and filling this order would not disrupt current operations.Blue Chip Company would incur an additional $1.80 per gear for shipping costs.Half of the manufacturing overhead costs are fixed and would be incurred no matter how many units are produced.In negotiating a price, how much is the minimum acceptable selling price?

• A)$7.60
• B)$5.80
• C)$4.75
• D)$6.55

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Definitions:

Equilibrium

A state of balance or stability within a system, where all forces acting on the system are canceled out by each other.

Sex-limited

Traits or characteristics that are expressed in only one sex, even though the genes for these traits might exist in both sexes.

Sex-linked

Referring to traits genetically determined by genes located on sex chromosomes.

Autosomal

Pertaining to any of the chromosomes except the sex chromosomes; relating to genes that are located on the autosomes.