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The normal selling price of our product is $42 per unit. The costs of production are direct materials, $8; direct labor, $6; variable overhead, $7; and fixed overhead, $4 (based on normal capacity) . The company has received a special order for 11,900 units at a unit sales price of $23. There is ample unused capacity to fill the order and $1 per unit will be incurred for additional freight costs. If the order is accepted, operating income will
Average Variable Cost
Average Variable Cost is the variable cost per unit of output, calculated by dividing total variable costs by total output, illustrating how variable costs change with output levels.
Output
The total amount of goods or services produced by a person, machine, factory, country, etc., within a particular time period.
Marginal Product
The additional output generated by employing one more unit of a factor of production.
Output Level
The total quantity of goods and services that a firm or industry produces over a set period.
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