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?
A)$28 per fan
B)$27 per fan
C)$31 per fan
D)$24 per fan

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?
A)$28 per fan 
B)$27 per fan 
C)$31 per fan 
D)$24 per fan

Quizplus · Accepted Answer

11ea7998_5c5f_22d0_911b_8d06f09e7463_TB2627_00_TB2627_00 The selling price should at least cover the relevant cost.

Landor Appliance Corporation Makes and Sells Electric Fans