A Company Is Currently Operating at 80% Capacity Producing 5,000

question 135

Multiple Choice

A company is currently operating at 80% capacity producing 5,000 units.Current cost information relating to this production is shown in the table below:
$$\begin{array} { | l | c | } \hline & \text { Per Unit } \\\hline \text { Sales price } & \$ 34 \\\hline \text { Direct material } & \$ 2 \\\hline \text { Direct labor } &\$ 3 \\\hline \begin{array} { l } \text { Variable } \\\text { overhead }\end{array} & \$ 4 \\\hline \text { Fixed overhead } & \$ 5\\\hline\end{array}$$
The company has been approached by a customer with a request for a 100-unit special order.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 $34 per unit.
• B) Any amount over $20 per unit.
• C) Any amount over $14 per unit.
• D) Any amount over $9 per unit.
• E) Any amount over $5 per unit.

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Definitions:

Point Estimate

A single value (or point) derived from a sample that serves as the best estimate of an unknown population parameter.

Hourly Wages

Hourly wages are payments made to workers based on the number of hours worked, typically quoted as an amount of money per hour.

Margin Of Error

The ± value added to and subtracted from a point estimate in order to develop an interval estimate of a population parameter.

Confidence

The degree to which one can feel assured or certain about an inference or prediction, often expressed as a percentage.