Adams Furniture receives a special order for 10 sofas for a special (total) pric

Question

Adams Furniture receives a special order for 10 sofas for a special (total) price of $6,800. The materials and direct labor for each sofa are $180. In addition, the setup, supervision, and other overhead costs are $200 per sofa.

1.) If Adams is currently operating at full capacity, what would be the opportunity cost per unit for lost sales to regular customers if the special sales order is accepted and the selling price per unit on regular sales equals $850?

Adams Furniture receives a special order for 10 sofas for a special (total) price of $6,800. The materials and direct labor for each sofa are $180. In addition, the setup, supervision, and other overhead costs are $200 per sofa.

1.) If Adams is currently operating at full capacity, what would be the opportunity cost per unit for lost sales to regular customers if the special sales order is accepted and the selling price per unit on regular sales equals $850?

Explanation / Answer

Existing Contribution: Revenue less Direct Cost and Overhead

: $850 - ($180+$200)

: $470

Oppurtunity Cost lost is the Contribution foregone (Since operating at full Capacity)

Oppurtunity Cost per unit : $470.

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