A Company Is Currently Operating at 65% Capacity Producing 12,000

question 190

Essay

A company is currently operating at 65% capacity producing 12,000 units. Cost information relating to this current production is shown in the following table:
$$\begin{array} { | l | r | } \hline & \text { Per Unit } \\\hline \text { Sales price } & \$ 6.00 \\\hline \text { Direct material } & \$ 2.30 \\\hline \text { Direct labor } & \$ 0.87 \\\hline \text { Variable overhead } & \$ 0.91 \\\hline \text { Fixed overhead } & \$ 0.70 \\\hline\end{array}$$ The company has been approached by a customer with a request for a special order for 2,000 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:

Parasympathetic Nervous System

A division of the autonomic nervous system that promotes relaxation and functions under normal, non-stressful conditions.

Oxytocin

A hormone produced by the hypothalamus and released by the pituitary gland, known for its roles in social bonding, sexual reproduction, childbirth, and the period after childbirth.

Adrenocorticotropic Hormone

A hormone produced by the pituitary gland that stimulates the adrenal cortex to secrete glucocorticoids, involved in stress response.

Cortisol

A type of glucocorticoid that provides a natural defense against inflammation and regulates carbohydrate metabolism.