Donellan Company produces a special gear used in automatic transmissions.Each gear sells for $30,and the company sells approximately 500,000 gears each year.Unit cost data for the year follows: Donellan has received an offer from a foreign manufacturer to purchase 25,000 gears.Domestic sales would be unaffected by this transaction.If the offer is accepted,variable distribution costs will increase $1.00 per gear for insurance,shipping,and import duties.The relevant unit cost to a pricing decision on this offer is:
A)$18.00.
B)$20.00.
C)$24.00.
D)$26.00.

Question

Donellan Company produces a special gear used in automatic transmissions.Each gear sells for $30,and the company sells approximately 500,000 gears each year.Unit cost data for the year follows:  Donellan has received an offer from a foreign manufacturer to purchase 25,000 gears.Domestic sales would be unaffected by this transaction.If the offer is accepted,variable distribution costs will increase $1.00 per gear for insurance,shipping,and import duties.The relevant unit cost to a pricing decision on this offer is:
A)$18.00. 
B)$20.00. 
C)$24.00. 
D)$26.00.

Quizplus · Accepted Answer

The Answer of Donellan Company produces a special gear used in automatic transmissions.Each gear sells for $30,and the company sells approximately 500,000 gears each year.Unit cost data for the year follows:  Donellan has received an offer from a foreign manufacturer to purchase 25,000 gears.Domestic sales would be unaffected by this transaction.If the offer is accepted,variable distribution costs will increase $1.00 per gear for insurance,shipping,and import duties.The relevant unit cost to a pricing decision on this offer is:
A)$18.00. 
B)$20.00. 
C)$24.00. 
D)$26.00.

Donellan Company Produces a Special Gear Used in Automatic Transmissions