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Landor Appliance Corporation makes and sells electric fans. Each fan regularly sells for $33. The following cost data per fan is based on a full capacity of 162,000 fans produced each period. Direct materials $ 10 Direct labor $ 7 Manufacturing overhead (50% variable and 50% unavoidable fixed) $ 6 A special order has been received by Landor for a sale of 30,000 fans to an overseas customer. The only selling costs that would be incurred on this order would be $4 per fan for shipping. Landor is now selling 132,000 fans through regular channels each period. Assume that direct labor is an avoidable cost in this decision. What should Landor use as a minimum selling price per fan in negotiating a price for this special order

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Answer:

$24

Explanation:

The computation of minimum selling price per fan is shown below:

= Direct material per unit + direct labor per unit + manufacturing overhead per unit + variable selling cost per unit

where,

Direct material per unit is $10

Direct labor per unit is $7

Manufacturing overhead cost per unit is = $6 × 50% = $3

Variable selling cost per unit = $4

Sp, the minimum selling price per fan is

= $10 + $7 + $3 + $4

= $24

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