Use the Following Information for the Next 2 Questions

question 106

Multiple Choice

Use the following information for the next 2 questions.
A manufacturer operating with excess capacity has been asked to fill a special order at $7.25 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, $1.50 for direct labor, $1.50 for variable overhead, and $0.50 for sales commission. No sales commission would be paid on this special order. The average overhead per unit is $0.25.
-The expected contribution margin per unit for the special order is

• A) $0.00
• B) $0.25
• C) $0.75
• D) $1.00

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Definitions:

Vertical Contracts

Agreements between companies at different levels in the supply chain (e.g., manufacturer and retailer), often concerning the conditions of purchase or sale of goods or services.

Consumers

Individuals or entities that purchase goods or services for personal use or consumption rather than for resale or production.

Evade Regulation

The act of avoiding compliance with laws and rules, typically through loopholes or other indirect methods, often to gain competitive advantage or reduce costs.

Vertical Relationships

Connections between companies or entities at different stages of the supply chain, such as producers and distributors.