Elhard Company Produces a Single Product

question 110

Multiple Choice

Elhard Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 40,000 units per month is as follows: The normal selling price of the product is $51.10 per unit.
An order has been received from an overseas customer for 2,000 units to be delivered this month at a special discounted price. This order would have no effect on the company's normal sales and would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $0.10 less per unit on this order than on normal sales.
Direct labor is a variable cost in this company.

-Suppose the company is already operating at capacity when the special order is received from the overseas customer.What would be the opportunity cost of each unit delivered to the overseas customer?

• A)$5.40
• B)$5.30
• C)$9.50
• D)$22.00

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Definitions:

Light Rays

Streams of photons traveling in a straight line, which are the basis of vision and are instrumental in phenomena such as reflection and refraction.

Retina

A light-sensitive layer at the back of the eye that converts light into neural signals which are sent to the brain.

Cornea

The transparent front part of the eye that covers the iris, pupil, and anterior chamber, providing most of the eye's optical power.

Lens

In the eye, a transparent structure located behind the iris that focuses light onto the retina to produce clear images.