Eley Company Produces a Single Product The Normal Selling Price of the Product Is

question 87

Multiple Choice

Eley Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 40,000 units per month is as follows:
$\begin{array}{|l|r|}\hline \text { Direct Materials } & \$ 42.60 \\\hline \text { Direct Labour } & \$ 8.10 \\\hline \text { Variable Manufacturing Overhead } & \$ 1.10 \\\hline \text { Fixed Manufacturing Overhead } & \$ 17.30 \\\hline \text { Variable Selling \& Administrative Expense } & \$ 1.8 \\\hline \text { Fixed Selling \& Administrative Expense } & \$ 8.00 \\\hline\end{array}$
The normal selling price of the product is $\$ 86.10$ per unit.An order has been received from an overseas customer for 2,000 units to be delivered this month at a special discounted price. This order would have no effect on the company's normal sales and would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $1.20 less per unit on this order than on normal sales.

Direct labour is a variable cost in this company.

-Suppose the company is already operating at capacity when the special order is received from the overseas customer.What would be the opportunity cost of each unit delivered to the overseas customer?

• A) $7.20.
• B) $8.40.
• C) $9.70.
• D) $32.50.

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Definitions:

Taenia Coli

Bands of longitudinal muscle fibers on the colon's surface, contributing to its segmentation and movement of contents.

Haustra

The sacculations or pouches formed by the folding of the colon's wall, allowing expansion and elongation for the process of digestion.

Villi

Small finger-like projections that line the small intestine, increasing its surface area for nutrient absorption.

Cystic Duct

A small duct that connects the gallbladder to the common bile duct, conducting bile to and from the gallbladder.