Question

12.

Elfalan Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 51,000 units per month is as follows:

Direct materials	$	48.10
Direct labor	$	9.20
Variable manufacturing overhead	$	2.20
Fixed manufacturing overhead	$	19.50
Variable selling & administrative expense	$	4.00
Fixed selling & administrative expense	$	19.00

The normal selling price of the product is $108.10 per unit.

An order has been received from an overseas customer for 3,100 units to be delivered this month at a special discounted price. This order would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $2.30 less per unit on this order than on normal sales.

Direct labor is a variable cost in this company.

Suppose there is not enough idle capacity to produce all of the units for the overseas customer and accepting the special order would require cutting back on production of 1,250 units for regular customers. The minimum acceptable price per unit for the special order is closest to: (Round your intermediate calculations to 2 decimal places.)

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Multiple Choice

$92.10 per unit

$108.10 per unit

$69.10 per unit

$79.18 per unit

Answer 1

Variable Costs
Direct materials	48.1
Direct labor	9.2
Variable manufacturing overhead	2.2
Variable selling & administrative expense[4 - 2.3]	1.7
Variable Cost per unit on special order	61.2
Variable Cost for 3100 units	189720

Selling Price	108.1
Less: Variable Costs
Direct materials	48.1
Direct labor	9.2
Variable manufacturing overhead	2.2
Variable selling & administrative expense	4
Contribution per unit on lost sales	44.6
Contribution for 1250 units	55750

Contribution on lost sales for 1250 units	55750
Variable cost for 3100 units	189720
Minimum Sales to be made	245470
Minimum Selling Price [245470/3100]	79.18

Therefore , the correct option is $79.18 per unit.