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:

Average Cost

This refers to the cost of producing a good or service, calculated by dividing the total costs of production by the number of units produced.

Lower Of Cost

An accounting principle that values inventory at the lower of its historical cost or the current market value, to record losses in value.

FIFO

First In, First Out; an inventory valuation method where the first items placed in inventory are the first to be removed or sold.

Market Value

The current price at which an asset or service can be bought or sold in a marketplace.