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

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Definitions:

Equity Method Investments

An accounting technique used to assess the profits earned through an investment in another company, incorporating these profits into the investing company's income statements.

Fair Value Option

Allows companies the choice to measure financial instruments at their fair values, with changes reflected in earnings.

Temporal Method

An accounting technique used to convert the financial statements of a subsidiary into the parent company's currency by using the exchange rates in effect at the time the assets and liabilities were acquired.

Translation Exchange Rates

Rates used to convert the financial statements of a foreign subsidiary to the reporting currency of the parent company.