Acceptable selling price per t-shirt in order to avoid loss

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Reference no: EM131212900

Vanana Tees sells its cool-zone t-shirt for $24 each. Unit product cost are as follows:

Direct materials $4.50

Direct labor $1.80

Manufacturing overhead $3.50

total: $9.80.

A special order to 1,200 shirts was recently received. There is enough capacity to fill the order. Filling this order will not disrupt current operations. Vanana expects to incur an additional $1.10 per unit for additional labor costs due to a slight modification the buyer wants made to the shirts. The manufacturing overhead costs consist of 30% allocated fixed cost with the other 70% being variable. In negotiating a price, how much is Vanana Tees' minimum acceptable selling price per t-shirt in order to avoid a loss?

a. $6.30

b. $8.75

c. $9.85

d. $7.35

Reference no: EM131212900

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