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A Company Normally Sells a Product for $25 Per Unit

question 5

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A company normally sells a product for $25 per unit. Variable per unit costs for this product are: $3 direct materials, $5 direct labor, and $2 variable overhead. The company is currently operating at 100% of capacity producing 30,000 units per year. Total fixed costs are $75,000 per year. The company should accept a special order for 1,000 units which would be sold for $13 per unit because the special order price exceeds variable costs.


Definitions:

Legality

The state or condition of being in accordance with the law; compliance with legal statutes and regulations.

Legal Purpose

The requirement that an agreement or contract must consist of lawful activities and meet legal criteria to be enforceable.

Utility Patent

A legal document granting exclusive rights to an inventor for a new, useful, and non-obvious process, machine, article of manufacture, or composition of matter.

Unique Or New Uses

Innovative or original applications or purposes for goods, services, or concepts.

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