A company is currently operating at 60% capacity producing 10,000 units. Cost information relating to this current production is shown in the following table:?Per UnitSales price$21.00Direct material$6.00Direct labor$4.12Variable overhead$2.23Fixed overhead$0.80The company has been approached by a customer with a request for a special order for 5,000 units. What is the minimum per unit sales price that management would accept for this order if the company wishes to increase current profits?
What will be an ideal response?
10,000/.6 - 10,000 = 6,666 unit remaining capacity
$6 + $4.12 + $2.23 = $12.35 incremental costs
Any sales price that exceeds the $12.35 incremental costs will increase current profits.
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