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NEW QUESTION: 1
A manufacturer has been approached by a new customer who wants to place a one-time order for a component similar to one that the manufacturer makes for another customer. Existing sales will not be affected by acceptance of this order. The manufacturer has a policy of setting its targeted selling price at 60% over full manufacturing cost. The manufacturing costs and the targeted selling price for the existing product are presented below.

The manufacturer has excess capacity to produce the quantity of the component desired by the new customer. The direct materials used in the component for the new customer would cost the manufacturer US $0.25 less than the component currently being made.
The variable selling expenses packaging and shipping) would be the same, or US $0.90
per unit. Under those, circumstances, the minimum unit price at which the manufacturer would accept the special order is one exceeding.
A. US $9.25
B. US $8.35
C. US $14.80
D. US $14.00
Answer: A
Explanation:
Because the manufacturer has excess capacity and existing sales will be unaffected, the minimum price the manufacturer should be willing to accept is anything above the total variable cost of the unit US $2.05 + $3.60 + $2.70 + $0.90 = US $9.25) an amount that includes the variable manufacturing cost and the variable selling expenses. The fixed costs are not relevant.

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