Navid Company manufactures basketball backboards. The following information pertains to the company's normal operations per month:

Required:
a. For long-run pricing, what is the full-cost base per unit?
b. Navid Company is approached by an overseas city to fulfill a one-time-only special order for 1,000 units. All cost relationships remain the same except for an additional one-time setup charge of $40,000. No additional design, marketing, or distribution costs will be incurred. What is the minimum acceptable bid per unit on this one-time-only special order?

Question

Navid Company manufactures basketball backboards. The following information pertains to the company's normal operations per month:
 
Required:
a. For long-run pricing, what is the full-cost base per unit?
b. Navid Company is approached by an overseas city to fulfill a one-time-only special order for 1,000 units. All cost relationships remain the same except for an additional one-time setup charge of $40,000. No additional design, marketing, or distribution costs will be incurred. What is the minimum acceptable bid per unit on this one-time-only special order?

Quizplus · Accepted Answer

The Answer is a. Direct materials $100.00
Direct manufacturing labor ($12 × 5,000)/15,000 4.00
Variable manufacturing ($150,000/15,000) 10.00
Fixed manufacturing ($300,000/15,000) 20.00
Marketing and distribution ($250,000/15,000) 16.67
Research and development ($200,000/15,000) 13.33
Total $164.00
b. Direct materials $100.00
Direct manufacturing labor 4.00
Variable manufacturing 10.00
Setup ($40,000 / 1,000) 40.00
Total $154.00

Navid Company Manufactures Basketball Backboards