Asked by Betsy Jaramillo on Jul 28, 2024
Verified
The company has received a special, one-time-only order for 500 units of component P06.There would be no variable selling expense on this special order and the total fixed manufacturing overhead and fixed selling and administrative expenses of the company would not be affected by the order.However, assume that Younes has no excess capacity and this special order would require 30 minutes of the constraining resource, which could be used instead to produce products with a total contribution margin of $10,000.What is the minimum price per unit below which the company should not accept the special order?
A) $67 per unit
B) $103 per unit
C) $20 per unit
D) $83 per unit
Constrained Resource
A factor that limits the output of a process or the achievement of organizational goals, often critical in determining maximum production or service levels.
Special Order
An order for a product or service that is not part of the company's usual offerings or produced under unique specifications, often at a negotiated price.
Minimum Price
The lowest price at which a product or service can be sold, often set to cover costs or comply with legal requirements.
- Ascertain the lowest favorable price point for special orders to prevent economic disadvantage.
- Comprehend the principle of opportunity costs and their impact on making choices.
Verified Answer
SR
shreeya reddyAug 02, 2024
Final Answer :
A
Explanation : 
The selling price for the special order would have to cover both the $47 variable cost per unit and the opportunity cost of $10,000. 
The selling price for the special order would have to cover both the $47 variable cost per unit and the opportunity cost of $10,000. 
Learning Objectives
- Ascertain the lowest favorable price point for special orders to prevent economic disadvantage.
- Comprehend the principle of opportunity costs and their impact on making choices.