14. Fansworth Television makes and sells portable television sets. Each televisi
ID: 2599884 • Letter: 1
Question
14. Fansworth Television makes and sells portable television sets. Each television regularly sells $200. The following cost data per television are based on a full capacity of 12.000 televisions p cach period $75 s55 Manufacturing overhead (75% variable, 25% unavoidable fixed) $48 A special order has been received by Farnsworth for a sale of 2,500 televisions to an overs customer. The only selling costs that would be incurred on this order would be $5 per tel hipping. Farnsworth is now selling 7,200 televisions through regular distributors each p hould be the minimum selling price per television in negotiating a price for this special $171 S166 $178 176 181.Explanation / Answer
Full capacity is 12,000 televisions.
The company is now selling 7,200 televisions.
The special order is for 2,500 televisions.
Therefore, if the company accepts the special order its fixed costs will not be affected.
Variable cost of one television for the special order
= Direct materials + Direct labor + Variable manufacturing overhead + Shipping cost
= $75 + $55 + ($48 x 75%) + $5
= $171
Total variable cost of selling one television on the special order is $171. If selling price is less than this amount, the company will suffer loss on the special order.
Thus,
Minimum selling price per television should be $171.
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