Gorski Corporation manufactures parts that are used in the production of washers and dryers. The following costs are associated with part no. 65: $\begin{array}{lr}
\text { Direct materials } & \$ 50 \
\text { Direct labor } & 19 \
\text { Variable manufacturing overhead } & 22 \
\text { Fixed manufacturing overhead } & 15 \
\text { Variable selling costs } & 11
\end{array}$ The company received a special-order inquiry from an appliance manufacturer in Spain for 15,000 units of part no. 65. Only $3 of fixed manufacturing will be incurred on the order, and the variable selling costs per unit will amount to only $5. Since Gorski has excess capacity, the minimum price that Gorski should charge the Spanish manufacturer is:

Question

Quizplus · Accepted Answer

The minimum price should cover all variable costs and any additional fixed costs. The relevant costs are: Direct materials ($50), Direct labor ($19), Variable manufacturing overhead ($22), and adjusted Variable selling costs ($5). The fixed manufacturing overhead is not relevant except for the additional $3. Total relevant cost per unit = $50 + $19 + $22 + $5 + $3 = $99.

Gorski Corporation Manufactures Parts That Are Used in the Production