Question

2. Coroid Manufacturers Inc. is approached by a European customer to fulfill a one−time−only special order for a product similar to one offered to domestic customers. The company has excess capacity. The following per unit data apply for sales to regular​ customers:

Variable costs:
Direct materials	$140
Direct labor	110
Manufacturing support	105
Marketing costs	55
Fixed costs:
Manufacturing support	175
Marketing costs	55
Total costs	640
Markup (40%)	256
Targeted selling price	$896

For Coroid Manufacturers​ Inc., what is the minimum acceptable price of this special​ order?

A.$ 480

B.$ 640

C.$ 410

D.$ 256

Answer 1

Correct Option C i.e. $410
Direct materials	140
Direct labor	110
Manufacturing support	105
Marketing costs	55
minimum acceptable price of this special​ order	410
Note: While calculating minimum acceptable price we need to take all variable cost into consideration because only that will incurred if special order s accepted. No fixed cost will be taken because it will remain same whether or not special order is accepted.