Waldrup Corporation Waldrup Corporation sells a product for $21 per unit,and the standard cost card for the product shows the following costs:
Refer to Waldrup Corporation.Waldrup received a special order for 1,200 units of the product.The only additional cost to Waldrup would be foreign import taxes of $2 per unit.If Waldrup is able to sell all of the current production domestically,what would be the minimum sales price that Waldrup would consider for this special order?

Question

Waldrup Corporation Waldrup Corporation sells a product for $21 per unit,and the standard cost card for the product shows the following costs:
 Refer to Waldrup Corporation.Waldrup received a special order for 1,200 units of the product.The only additional cost to Waldrup would be foreign import taxes of $2 per unit.If Waldrup is able to sell all of the current production domestically,what would be the minimum sales price that Waldrup would consider for this special order?

Quizplus · Accepted Answer

The additional cost of import taxes per unit is $2, bringing the total cost of production to $12 ($10 variable cost + $2 import tax). 
To make a profit, Waldrup would need to sell each unit for more than $12. 
Since they are currently selling the product domestically at $21 per unit, they can afford to sell the special order for less than $21 per unit and still cover their variable cost and make a profit. 
The minimum sales price would be $23 per unit (($10 + $2) x 1.2 = $14.40 total cost per unit, $21 - $14.40 = $6.60 profit per unit), but since that option is not available, the next best choice would be $23, which is answer choice D.

Waldrup Corporation Waldrup Corporation Sells a Product for $21 Per