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: $\begin{array}{l}
\text { Direct Materials}& \$ 4 \
\text { Direct Labour }& \$ 5 \
\text { Manufacturing Overhead}& \$ 6 \
\text { Unit Produot Cost }&\$ 15
\end{array}$
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,what should be the minimum acceptable selling price per unit?
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: $\begin{array}{l}
\text { Direct Materials}&  \$ 4 \
\text { Direct Labour  }& \$ 5 \
\text { Manufacturing Overhead}&  \$ 6 \
\text { Unit Produot Cost  }&\$ 15
\end{array}$ 
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,what should be the minimum acceptable selling price per unit?
A) $14.
B) $15.
C) $16.
D) $18.

Quizplus · Accepted Answer

The minimum acceptable selling price should cover the variable costs. Variable costs include direct materials ($4), direct labour ($5), one-third of manufacturing overhead ($2), and shipping costs ($3), totaling $14.

Wagner Company Sells Product a for $21 Per Unit A Special Order Offering to Buy 20,000 Units Has Been