ABC Toys manufactures and sells wooden toys for $15 each.The company has the capacity to produce 25,000 toys in a year,but is currently produces and sells 20,000 toys per year.The company currently incurs the following costs at its current production level of 20,000 toys:

A retailer is interested in purchasing the excess capacity of 5,000 toys if it can receive a special price.This special order would not affect ABC Toys' regular sales or its cost structure.ABC Toys' profits would increase from this special order if the special order price per toy is greater than

Question

ABC Toys manufactures and sells wooden toys for $15 each.The company has the capacity to produce 25,000 toys in a year,but is currently produces and sells 20,000 toys per year.The company currently incurs the following costs at its current production level of 20,000 toys:

A retailer is interested in purchasing the excess capacity of 5,000 toys if it can receive a special price.This special order would not affect ABC Toys' regular sales or its cost structure.ABC Toys' profits would increase from this special order if the special order price per toy is greater than

Quizplus · Accepted Answer

C)
Variable Mfg.Cost $70,000
Variable Selling Cost + 75,000
Total Cost $145,000/ 20,000 produced = $7.25 Contribution Margin

ABC Toys Manufactures and Sells Wooden Toys for $15 Each