what is the minimum sales price Sweet Treats should accept for the order? and wh

Question

what is the minimum sales price Sweet Treats should accept for the order? and why?

ncome Explain why s Determine the balance in Finished Goods Inventory as of May 31. tive 3 E21-21 Setting sales prices The Sweet Treats Company manufactures candy that is sold to food distributons. The d dur- ntines Day. During the other six months of the year, the manufacturing facility operates at 75% of capacity. The Sweet company produces at full capacity for six months each year to meet peak deman Treats Company provides the following data for the year 1,800,000 cases Cases of candy produced and sold Sales price Variable manufacturing costs Fixed manufacturing costs Variable selling and administrative costs Fixed selling and administrative costs 37.00 per case 20.00 per case 6,400,000 per year 2.00 per case 3,500,000 per year The Sweet Treats Company receives an offer to produce 13,000 cases of candy for a special event. This is a one-time opportunity during a period when the company has excess capacity: What is the minimum sales price The Sweet Treats Company should accept for the order? Explain why. ective 3 E21-22 Analyzing profitability

Explanation / Answer

Minimum selling price for the special offer is total variable cost per unit because company has excess capacity.Fixed costs are irrelevent for the decision making since such costs will incure either accept or reject the offer.

Therefore, minimum selling price = $ 22 Per unit

$ Variable manufacturing costs 20 Variable selling and administrative costs 2 Total variable cost per unit 22

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