Preston Wade
Preston Wade, a local craftsman, normally sells his handcrafted wooden birdhouses for $88 each. Preston has the capacity to produce as many as 50 birdhouses a week. In a normal week, Preston makes 20 birdhouses with the following costs per unit:
$\begin{array}{lc}
\text { Direct materials } & \$ 5.00 \
\text { Direct labour } & \$ 20.00 \
\text { Variable overhead } & \$ 4.00 \
\text { Fixed overhead } & \$ 2.00
\end{array}$

-Refer to the Preston Wade information below.
Preston has received a special order from a local plant nursery for 25 birdhouses.The nursery wishes to have the birdhouses engraved with their own logo,therefore,the order would require the rental of a special engraving tool at a cost of $200.Preston requires a minimum $2000 profit on any special order.The minimum price per birdhouse that Preston should charge the nursery is:

Question

Preston Wade
Preston Wade, a local craftsman, normally sells his handcrafted wooden birdhouses for $88 each. Preston has the capacity to produce as many as 50 birdhouses a week. In a normal week, Preston makes 20 birdhouses with the following costs per unit:
$\begin{array}{lc}
\text { Direct materials } & \$ 5.00 \
\text { Direct labour } & \$ 20.00 \
\text { Variable overhead } & \$ 4.00 \
\text { Fixed overhead } & \$ 2.00
\end{array}$

-Refer to the Preston Wade information below.
Preston has received a special order from a local plant nursery for 25 birdhouses.The nursery wishes to have the birdhouses engraved with their own logo,therefore,the order would require the rental of a special engraving tool at a cost of $200.Preston requires a minimum $2000 profit on any special order.The minimum price per birdhouse that Preston should charge the nursery is:

Quizplus · Accepted Answer

To determine the minimum price per birdhouse that Preston should charge, we need to calculate the total cost of the order (including the special engraving tool rental) and add Preston's required minimum profit, then divide by the total number of birdhouses.

Special engraving tool rental cost = $200
Minimum required profit = $2000

Total cost of order = $200 + $2000 = $2200

Number of birdhouses in order = 25

Minimum price per birdhouse = (total cost of order + minimum required profit) / number of birdhouses
Minimum price per birdhouse = ($2200 + $2000) / 25
Minimum price per birdhouse = $88

The minimum price per birdhouse that Preston should charge the nursery is $88. However, none of the answer choices match this value exactly. The closest option is B, $117, which is higher than the calculated minimum price but still provides Preston with a profit greater than his required minimum. Therefore, option B is the best choice.

Preston Wade Preston Wade, a Local Craftsman, Normally Sells His

Preston Wade
Preston Wade, a Local Craftsman, Normally Sells His