Lagusta Company incurred the following costs for 50000 units:
Variable costs $180000
Fixed costs 240000
Lagusta has received a special order from a foreign company for 5000 units. There is sufficient capacity to fill the order without jeopardizing regular sales. Filling the order will require spending an additional $8500 for shipping.
If Lagusta wants to earn $9000 on the order what should the unit price be?

Question

Lagusta Company incurred the following costs for 50000 units:
 Variable costs $180000
Fixed costs 240000
Lagusta has received a special order from a foreign company for 5000 units. There is sufficient capacity to fill the order without jeopardizing regular sales. Filling the order will require spending an additional $8500 for shipping.
If Lagusta wants to earn $9000 on the order what should the unit price be?

Quizplus · Accepted Answer

The variable cost per unit is $180,000 / 50,000 = $3.60. For 5,000 units, the variable cost is 5,000 * $3.60 = $18,000. Adding the additional shipping cost of $8,500 gives a total cost of $26,500. To earn $9,000, the total revenue should be $26,500 + $9,000 = $35,500. Therefore, the unit price should be $35,500 / 5,000 = $7.10.

Lagusta Company Incurred the Following Costs for 50000 Units