The Melrose Corporation produces a single product, Product C. Melrose has the capacity to produce 108,000 units of Product C each year. If Melrose produces at capacity, the per unit costs to produce and sell one unit of Product C are as follows:          Direct materials $ 33.30   Direct labor $ 24.60   Variable manufacturing overhead $ 18.70   Fixed manufacturing overhead $ 23.50   Variable selling expense $ 15.80   Fixed selling expense $ 9.90     The regular selling price of one unit of Product C is $148.80. A special order has been received by Melrose from Moore Corporation to purchase 6,000 units of Product C during the upcoming year. If this special order is accepted, the variable selling expense will be reduced by 75%. Total fixed manufacturing overhead and fixed selling expenses would be unaffected except that Melrose will need to purchase a specialized machine to engrave the Moore name on each unit of product C in the special order. The machine will cost $10,800 and will have no use after the special order is filled. Assume that direct labor is a variable cost.Assume that Melrose expects to sell 98,000 units of Product C to regular customers next year. At what selling price for the 6,000 units would Melrose be economically indifferent between accepting and rejecting the special order from Moore?   $80.85 $82.35 $102.85 $104.35

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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The Melrose Corporation produces a single product, Product C. Melrose has the capacity to produce 108,000 units of Product C each year. If Melrose produces at capacity, the per unit costs to produce and sell one unit of Product C are as follows:
 

       
Direct materials $ 33.30  
Direct labor $ 24.60  
Variable manufacturing overhead $ 18.70  
Fixed manufacturing overhead $ 23.50  
Variable selling expense $ 15.80  
Fixed selling expense $ 9.90  

 


The regular selling price of one unit of Product C is $148.80. A special order has been received by Melrose from Moore Corporation to purchase 6,000 units of Product C during the upcoming year. If this special order is accepted, the variable selling expense will be reduced by 75%. Total fixed manufacturing overhead and fixed selling expenses would be unaffected except that Melrose will need to purchase a specialized machine to engrave the Moore name on each unit of product C in the special order. The machine will cost $10,800 and will have no use after the special order is filled. Assume that direct labor is a variable cost.

Assume that Melrose expects to sell 98,000 units of Product C to regular customers next year. At what selling price for the 6,000 units would Melrose be economically indifferent between accepting and rejecting the special order from Moore?

 

$80.85

$82.35

$102.85

$104.35

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