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:

Rigid

Characterized by inflexibility or the inability to adapt to new situations, often leading to inefficiency or failure in changing environments.

Unwieldy

Difficult to handle, control, or manage due to size, complexity, or awkwardness.

Mechanistic Structures

Organizational structures characterized by rigid hierarchies, strict rules, and centralized decision-making, typical in stable environments.

Organic Structures

Flexible and adaptive organizational structures that are characterized by decentralized authority, low levels of formalization, and high levels of horizontal communication.