Question

Neal Manufacturing Inc. has been approached by a customer who wants to place a one-time order for a component similar to one that they make for another customer. Existing sales will not be affected by the acceptance of this order. The manufacturing costs and the targeted selling price for the component currently being made are below. The direct materials used in the new component for the new customer would cost $.50 more than those in the component currently being made. The variable selling expenses would be $1.25 per unit. What is the minimum unit price at which Neal Manufacturing would be willing to accept the special order?

Direct materials		2.70
Direct labor		4.40
Varialbe manufacturing overhead
(75% of direct labor cost)		3.30
Fixed manufacturing overhead
(150% of direct labor cost)		6.60
Total manufacturing cost		17.00
Markup (55% of full manufacturing cost)		9.35
Targeted selling price		26.35

Answer 1

Answer : Minimum unit price at which Neal Manufacturing would be willing to accept the special order = $12.15

Explanation:

Note: For determining minimum unit price of one-time order , fixed cost irrelevant cost & since existing sales will not be affected only variable cost per unit will constitute the unit price of one-time order

Minimum unit price to accept the special order

Direct materials ($2.70 + $0.50)	$3,20
Direct labor	$4.40
Variable manufacturing overhead	$3.30
Variable selling expenses	$1.25
Minimum unit price to accept the special order	$12.15