Wagner Company sells product A for $21 per unit.Wagner's unit product cost based on the full capacity of 200,000 units is as follows: A special order offering to buy 20,000 units has been received from a foreign distributor.The only selling costs that would be incurred on this order would be $3 per unit for shipping.Wagner has sufficient idle capacity to manufacture the additional units.Two-thirds of the manufacturing overhead is fixed and would not be affected by this order.Assume that direct labour is an avoidable cost in this decision.In negotiating a price for the special order,the minimum acceptable selling price per unit should be:
A) $14.
B) $15.
C) $16.
D) $18.

Question

Wagner Company sells product A for $21 per unit.Wagner's unit product cost based on the full capacity of 200,000 units is as follows:  A special order offering to buy 20,000 units has been received from a foreign distributor.The only selling costs that would be incurred on this order would be $3 per unit for shipping.Wagner has sufficient idle capacity to manufacture the additional units.Two-thirds of the manufacturing overhead is fixed and would not be affected by this order.Assume that direct labour is an avoidable cost in this decision.In negotiating a price for the special order,the minimum acceptable selling price per unit should be:
A) $14. 
B) $15. 
C) $16. 
D) $18.

Quizplus · Accepted Answer

The Answer of Wagner Company sells product A for $21 per unit.Wagner's unit product cost based on the full capacity of 200,000 units is as follows:  A special order offering to buy 20,000 units has been received from a foreign distributor.The only selling costs that would be incurred on this order would be $3 per unit for shipping.Wagner has sufficient idle capacity to manufacture the additional units.Two-thirds of the manufacturing overhead is fixed and would not be affected by this order.Assume that direct labour is an avoidable cost in this decision.In negotiating a price for the special order,the minimum acceptable selling price per unit should be:
A) $14. 
B) $15. 
C) $16. 
D) $18.

Wagner Company Sells Product a for $21 Per Unit