A customer has asked the Jinx Company to produce a custom order. 18 The Jinx com

Question

A customer has asked the Jinx Company to produce a custom order. 18 The Jinx company normally sells the item for cial order is for the following number of items $175 2,000 The spe Per unit costs to produce the regular product and special order. Direct materials and direct labor $140 $15 S5 Manufacturing overhead The amount of overhead that is variable is The special order will also require a special tool that will have no other use once the special order is completed. Its cost is S60,000 Suppose there is enough idle capacity to produce the items and this order would have no effect on the company's normal sales. What is the minimum (i.e., the break-even) sales price per unit that Jinx should charge for this special order? a. $175 b. $145 c. $155 d. $153 e. $163

Explanation / Answer

Solution: $175

Working:

Unit Price Unit s Amount DM 140 2000 280000 Manufacturing overhead cost (variable) 5 2000 10000 Additional cost 60,000 Total 2000 350000 Thus minimum cost per unit = 175 Normal selling 175 2000 350000

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