Question

Forrest Corporation manufactures parts that are used in the production of washers and dryers. The following costs are associated with part no. 65:

Direct materials	$	50
Direct labor		19
Variable manufacturing overhead		22
Fixed manufacturing overhead		15
Variable selling costs		11

The company received a special-order inquiry from an appliance manufacturer in Brazil for 15,000 units of part no. 65. The variable selling costs per unit will amount to only $8. Since Forrest has excess capacity, the minimum price that Forrest should charge the Brazil manufacturer is:

Answer 1

The minimum price that Forrest should charge the Brazil manufacturer is:

Direct Material	$50
Direct Labor	$19
Variable manufacturing overhead	$22
Variable selling costs	$8
	$99

The minimum price that Forrest should charge the Brazil manufacturer is $99.

Variable Selling costs are $8 for this order. Fixed Costs are not to be included to calculate the minimum price as it is anyways incurred.

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