A Manufacturer Operating with Excess Capacity Has Been Asked to Fill

question 55

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 labour, $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