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What should Jackson use as a minimum selling price per fan

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Question - Jackson Appliance Corporation makes and sells electric fans. Each fan regularly sells for $32. The following cost data per fan is based on a full capacity of 160,000 fans produced each period.

Direct materials $9

Direct labor $9

Manufacturing overhead (50% variable and 50% unavoidable fixed) $6

A special order has been received by Jackson for a sale of 30,000 fans to an overseas customer. The only selling costs that would be incurred on this order would be $3 per fan for shipping. Jackson is now selling 130,000 fans through regular channels each period. Assume that direct labor is an avoidable cost in this decision. What should Jackson use as a minimum selling price per fan in negotiating a price for this special order?

A. $24 per fan

B. $28 per fan

C. $22 per fan

D. $21 per fan

Reference no: EM132619456

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