The Melville Corporation produces a single product called a Pong. Melville has the capacity to produce 60,000 Pongs each year. If Melville produces at capacity, the per unit costs to produce and sell one Pong are as follows: Direct materials$15Direct labor$12Variable manufacturing overhead$8Fixed manufacturing overhead$9Variable selling expense$8Fixed selling expense$3The regular selling price for one Pong is $80. A special order has been received by Melville from Mowen Corporation to purchase 6,000 Pongs next year. If this special order is accepted, the variable selling expense will be reduced by 75%. However, Melville will have to purchase a specialized machine to engrave the Mowen name on each Pong in the special order. This machine will cost $9,000 and it will have no use after the
special order is filled. The total fixed manufacturing overhead and selling expenses would be unaffected by this special order. Assume that direct labor is a variable cost.Assume Melville anticipates selling only 50,000 units of Pong to regular customers next year. At what selling price for the 6,000 special order units would Melville be financially indifferent between accepting or rejecting the special order from Mowen?
A. $38.50 per unit
B. $37.00 per unit
C. $51.50 per unit
D. $49.00 per unit
Answer: A
You might also like to view...
A change in accounting estimate affected by a change in accounting principle should be reported as
A) a change in accounting principle. B) a change in accounting estimate and a change in accounting principle. C) a change in accounting estimate. D) neither a change in accounting estimate nor a change in accounting principle.
A major advantage of a ________ strategy is that the company does not tie its reputation to the product
A) blanket family name B) licensing C) separate family brand name D) category extension E) brand revitalization
Like requests and responses, instruction messages follow a straightforward, direct approach
Indicate whether the statement is true or false
The state variables of a restaurant change when a customer arrives, when an order is taken, and when the food is served. As such, the restaurant can be represented with a continuous simulation model
a. True b. False