Managerial Accounting Quiz
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RELEVANT COSTS AND SPECIAL DECISIONS
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Zenith Manufacturing produces industrial motors with a normal capacity of 10,000 units per year. Current production is 8,500 units. The company has received a special order for 1,200 units at $85 per unit from an overseas distributor. This order would not affect regular sales. Current cost data per unit: Direct materials $35, Direct labor $25, Variable overhead $12, Fixed overhead $18 (based on normal capacity). The special order would require additional packaging costs of $3 per unit and a one-time setup cost of $2,400. Regular selling price is $110 per unit.
What is the minimum acceptable price per unit for this special order to break even?
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