A Company Has Just Received a Special, One-Time Order for 1,000

question 73

Essay

A company has just received a special, one-time order for 1,000 units.Producing the order will have no effect on the production and sales of other units.The buyer's name will be stamped on each unit, at a total cost of $2,000.Normal cost data, excluding stamping, follows:
$\begin{array}{lr}\text { Direct materials } & \$ 10 \text { per unit } \\\text { Direct labor } & 16 \text { per unit } \\\text { Variable overhead } & 4 \text { per unit } \\\text { Allocated fixed overhead } & 12 \text { per unit } \\\text { Allocated fixed selling expense } & 8 \text { per unit }\end{array}$ What selling price per unit will this company require to earn $3,000 on the order?

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Definitions:

Natural Monopolies

Industries where a single firm can supply a product or service to an entire market at a lower cost than two or more firms.

Marginal Cost

The financial outlay for manufacturing an additional unit of a product or service.

Average Cost

Average cost refers to the total cost of production divided by the total quantity produced, indicating the cost on a per-unit basis.

Natural Resources

Materials or substances occurring in nature which can be exploited for economic gain.