A company has received a special order from a customer to make 5,000 units of a customized product. The direct materials cost per unit of the customized product is $15 , the direct labor cost per unit is $5 , and the manufacturing overhead per unit is $18 , including $6 of variable manufacturing overhead. If the company has sufficient available manufacturing capacity, the minimum price that can be accepted for the special order is $26. So, the correct option is b.
The increment cost per unit for the special order is calculated as:
Direct Material = $15.00
Direct Labor = $5.00
Variable Factory Overhead = $6.00
Incremental cost per unit = Direct Material + Direct Labor + Variable Factory Overhead
i.e. $15.00 + $5.00+$6.00
= $26.00
The incremental cost per unit is $26, which should be the minimum price that can be accepted for the special order. Therefore, the correct option is b.
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