Landor Appliance Corporation makes and sells electric fans. Each fan regularly sells for $42. The following cost data per fan is based on a full capacity of 150,000 fans produced each period. A special order has been received by Landor for a sale of 25,000 fans to an overseas customer. The only selling costs that would be incurred on this order would be $4 per fan for shipping. Landor is now selling 120,000 fans through regular channels each period. Assume that direct labor is an avoidable cost in this decision. What should Landor use as a minimum selling price per fan in negotiating a price for this special order?

Question

Landor Appliance Corporation makes and sells electric fans. Each fan regularly sells for $42. The following cost data per fan is based on a full capacity of 150,000 fans produced each period.  A special order has been received by Landor for a sale of 25,000 fans to an overseas customer. The only selling costs that would be incurred on this order would be $4 per fan for shipping. Landor is now selling 120,000 fans through regular channels each period. Assume that direct labor is an avoidable cost in this decision. What should Landor use as a minimum selling price per fan in negotiating a price for this special order?

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The Answer of Landor Appliance Corporation makes and sells electric fans. Each fan regularly sells for $42. The following cost data per fan is based on a full capacity of 150,000 fans produced each period.  A special order has been received by Landor for a sale of 25,000 fans to an overseas customer. The only selling costs that would be incurred on this order would be $4 per fan for shipping. Landor is now selling 120,000 fans through regular channels each period. Assume that direct labor is an avoidable cost in this decision. What should Landor use as a minimum selling price per fan in negotiating a price for this special order?

Landor Appliance Corporation Makes and Sells Electric Fans