Question

Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 100,800 units per year is: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expenses Fixed selling and administrative expenses $ 1.50 $ 4.00 $1.00 $ 4.75 $ 1.20 $ 3.00 The normal selling price is $19.00 per unit. The company's capacity is 129,600 units per year. An order has been received from a mail- order house for 2,400 units at a special price of $16.00 per unit. This order would not affect regular sales or the company's total fixed costs.

Answer 1

Particulars	Amount
Direct material	1.5
Direct labour	4
Variable Manufacturing overhead	1
Variable selling expenses	1.2
Total Variable cost	7.7
Special selling price for 2400 units	16
Less: Variable cost	7.7
Contribution per unit	8.3
Total contribution	19,920

2 The minimum variable cost incurred by the company in manufacturing these 1000 units is $ 7.7. Fixed costs have already been incurred by the company and therefore is not relevant for decision making. The minimum cost to b e charged by the company is $ 7.7