Question

You just graduated from West Virginia University Institute of Technology and you were hired to be an assistant production manager for X corporation. You collected the following production data: Full capacity in units Current capacity in units Direct materials cost per unit Direct materials cost per unit Manufacturing overhead per unit (variable) Total manufacturing overhead (Fixed) Total selling expenses | Total general and administrative expenses Normal selling price per unit 200,000 150,000 $6.00 $4.00 $2.00 $300,000 $100,000 $200,000 $40.00 Your manager tells you that he received a request from the Vice President of Sales to give a special customer that is considering buying from us. The client's initial order is for 30,000 units and the Vice President has promised to give the special customer the best price he can. If the company requires a minimum of $1.00 per unit profit on every order what is the best price that you can give the customer. If the company requires a minimum of $5.00 per unit profit on every order what is the best price that you can give the customer.

Answer 1

If the company requires a minimum $1 per unit profit on every order the best price that can be offered-

Direct Material cost per unit	6.00
Direct Material cost per unit	4.00
Variable Manufacturing Overhead per unit	2.00
Required profit per unit	1.00
Total price to be charged per unit	13.00

Assuming Selling & general and Administrative overheads are fixed.

If the company requires a minimum $5 per unit profit on every order the best price that can be offered-

Direct Material cost per unit	6.00
Direct Material cost per unit	4.00
Variable Manufacturing Overhead per unit	2.00
Required profit per unit	5.00
Total price to be charged per unit	17.00

Assuming Selling & general and Administrative overheads are fixed.