Use the Following Data for the Next 2 Questions

question 39

Multiple Choice

Use the following data for the next 2 questions:
A manufacturer operating with excess capacity has been asked to fill a special order at $7.25 per unit. The regular price is $10 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, $2.00 for direct labor, $1.00 for variable overhead, and $0.50 for sales commission. No sales commission would be paid on this special order. The average fixed overhead cost per unit is $0.25.
-Assume there is no excess capacity (i.e., the company can sell every unit that it produces to regular customers) . Under the general decision rule, the minimum price per unit for this special order would be

• A) $10.00
• B) $7.25
• C) $5.75
• D) $6.50

---

Definitions:

Ford

Ford refers to the Ford Motor Company, a major American automaker known for its mass production of automobiles and the pioneering of assembly line manufacturing techniques.

$2,000 Rebate

A financial incentive that returns $2,000 to purchasers or users of a product or service, often as a promotion or policy.

Pick-up Trucks

Light-duty trucks with an enclosed cabin and open cargo area with low sides and tailgate.

Cartel

An association of manufacturers or suppliers that agree to fix prices, limit supply, or restrain competition in a particular market.