Item 1 16 points Problem 12-18 Relevant Cost Analysis in a Variety of Situations

ID: 2440426 • Letter: I

Question

Item 1 16 points

Problem 12-18 Relevant Cost Analysis in a Variety of Situations [LO12-2, LO12-3, LO12-4]

Andretti Company has a single product called a Dak. The company normally produces and sells 82,000 Daks each year at a selling price of $60 per unit. The company’s unit costs at this level of activity are given below:

Direct materials

8.50

Direct labor

9.00

Variable manufacturing overhead

2.90

Fixed manufacturing overhead

4.00

($328,000 total)

Variable selling expenses

4.70

Fixed selling expenses

3.00

($246,000 total)

Total cost per unit

32.10

3. The company has 600 Daks on hand that have some irregularities and are therefore considered to be "seconds." Due to the irregularities, it will be impossible to sell these units at the normal price through regular distribution channels. What is the unit cost figure that is relevant for setting a minimum selling price?

NOTE- It is NOT $25.10, $28.10, $29.10, or $32.10.