Reference no: EM132382486

Dweeb Corp. produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 58,000 units per month is as follows:

Direct material                                                       $72.50

Direct labor                                                           17.00

Variable manufacturing overhead                            5.00

Fixed manufacturing overhead                                23.00

Variable selling and administrative expense             7.00

Fixed selling and administrative expense                 17.00

Total                                                                    $141.50

The normal selling price of the product is $170.00 per unit.

An order has been received from an overseas customer for 10,000 units to be delivered this month at a special discounted price. This order would have no effect on the company's normal sales and would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $5.00 less per unit on this order than on normal sales. Direct labor is a variable cost in this company.

• Suppose the company is already operating at capacity when the special order is received from the overseas customer. What would be the opportunity cost of each unit delivered to the overseas customer?
• Suppose there is not enough idle capacity to produce all of the units for the overseas customer and accepting the special order would require cutting back on production of 10,000 units for regular customers. What would be theminimum acceptable price per unit for the special order?