A Manufacturer Operating with Excess Capacity Has Been Asked to Fill

question 23

Multiple Choice

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. Under the general decision rule, the minimum price per unit for this special order is

• A) $7.25
• B) $6.50
• C) $7.00
• D) $7.50

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Definitions:

Lens

The transparent disk-shaped structure behind the iris and the pupil that changes shape as it focuses on objects at varying distances.

Cornea

The transparent front part of the eye that covers the iris, pupil, and anterior chamber, providing most of the eye's optical power.

Pupil

The adjustable opening in the center of the iris of the eye, through which light enters and is focused on the retina.

Retina

The layer of tissue that is located on the inner surface of the eyeball and contains the sensory receptors for vision.