A company has received a special order from a customer to make 5,000 units of a customized product. The direct materials cost per unit of the customized product is 15 , the direct labor cost per unit is 5 , and the manufacturing overhead per unit is 18 , including 6 of variable manufacturing overhead. If the company has sufficient available manufacturing capacity, what is the minimum price that can be accepted for the special order.a. 24 b. 26 c. 32 d. 38

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23-08-2022
Business

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A company has received a special order from a customer to make 5,000 units of a customized product. The direct materials cost per unit of the customized product is 15 , the direct labor cost per unit is 5 , and the manufacturing overhead per unit is 18 , including 6 of variable manufacturing overhead. If the company has sufficient available manufacturing capacity, what is the minimum price that can be accepted for the special order.a. 24 b. 26 c. 32 d. 38

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A company has received a special order from a customer to make 5,000 units of a customized product. The direct materials cost per unit of the customized product is $15 , the direct labor cost per unit is $5 , and the manufacturing overhead per unit is $18 , including $6 of variable manufacturing overhead. If the company has sufficient available manufacturing capacity, the minimum price that can be accepted for the special order is $26. So, the correct option is b.

The increment cost per unit for the special order is calculated as:

Direct Material = $15.00

Direct Labor = $5.00

Variable Factory Overhead = $6.00

Incremental cost per unit = Direct Material + Direct Labor + Variable Factory Overhead

i.e. $15.00 + $5.00+$6.00

= $26.00

The incremental cost per unit is $26, which should be the minimum price that can be accepted for the special order. Therefore, the correct option is b.

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