A Company Is Currently Operating at 75% Capacity and Producing

question 111

Multiple Choice

A company is currently operating at 75% capacity and producing 3,000 units.Current cost information relating to this production is shown in the table below:
$$\begin{array} { | l | c | } \hline & \text { Per Unit } \\\hline \text { Sales price } & \$ 43 \\\hline \text { Direct material } & \$ 7 \\\hline \text { Direct labor } & \$ 6 \\\hline \begin{array} { l } \text { Variable } \\\text { overhead }\end{array} & \$ 4 \\\hline \text { Fixed overhead } & \$ 4 \\\hline\end{array}$$
The company has been approached by a customer with a request for a 200-unit special.What is the minimum per unit sales price that management would accept for this order if the company wishes to increase current profits?

• A) Any amount over $43 per unit.
• B) Any amount over $17 per unit.
• C) Any amount over $21 per unit.
• D) Any amount over $13 per unit.
• E) Any amount over $22 per unit.

---

Definitions:

Marginal Social Cost

The total cost to society of producing an additional unit of a good, including both private costs and any externalities.

Marginal Social Benefit

The added value to the general population from the manufacture or use of one more unit of a good or service.

Marginal Social Benefit

The benefit gained by society from the production of one more unit of a good or service.

Marginal Social Cost

The total cost society bears for the production of an additional unit of a good or service, including both private costs and any externalities.