Richter Company has a single product called a Wim. The company normally produces

Question

Richter Company has a single product called a Wim. The company normally produces and sells 75,000 Wims each year at a selling price of $43 per unit. The company’s unit costs at this level of activity are given below:

The company has 700 Wims on hand that were produced last month and have small blemishes. Due to the blemishes, it will be impossible to sell these units at the normal price. If the company wishes to sell them through regular distribution channels, what unit cost figure is relevant for setting a minimum selling price? (Round your answer to 2 decimal places.)

Relevant unit cost= ??

Direct Materials $8.10 Direct Labor 13.00 variable manufacturing overhead 4.90 Fixed manufacturing overhead 4.00 Variable selling epenses 5.70 Fixed selling expenses 6.00 Total cost per unit 41.70

Explanation / Answer

If the company wishes to sell 700 Wims through regular distribution channels, Variable selling expense per unit is relevant for setting a minimum selling Price.

Hence Relevant Unit Cost figure is $5.70 Per unit for setting minimum selling price.

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