A Company Is Currently Operating at 60% Capacity Producing 10,000

question 79

Essay

A company is currently operating at 60% capacity producing 10,000 units.Cost information relating to this current production is shown in the following table:
$\begin{array}{|l|r|}\hline & \text { Per Unit } \\\hline \text { Sales price } & \$ 21 \\\hline \text { Direct material } & \$ 6 \\\hline \text { Direct labor } & \$ 4.12 \\\hline \begin{array}{l}\text { Variable } \\\text { overhead }\end{array} & \$ 2.23 \\\hline \text { Fixed overhead } & \$ 0.80\\\hline \end{array}$

The company has been approached by a customer with a request for a special order for 5,000 units.What is the minimum per unit sales price that management would accept for this order if the company wishes to increase current profits?

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Definitions:

Mud Statues

Sculptures or figurines crafted from mud, often associated with folk art or traditional decorations.

Workers

Individuals engaged in any form of employment, contributing labor to produce goods or provide services.

Economies of Scale

The cost benefits that organizations gain from their operation size, where the cost for each unit of output typically reduces as the scale increases.

Inputs

Inputs are the resources used in the production process to create goods or services, including labor, raw materials, machinery, and capital.