CORRECT ANSWER B. THE MINIMUM PRICE THAT GARDNER SHOULD CHARGE...

241.

Correct answer b. The minimum price that Gardner should charge for the special order is

$96.50 per unit. This price covers the variable cost of KT-6500 plus the forgone contribution

from Product XR-2000 as shown below.

Hours required for 1,000 units of KT-6500

3,000 hours

Units of XR-2000 not produced: 3,000 hours ÷ 4

750 units

XR-2000 contribution: $105 - $24 - $10 - $5 - $4

$62 per unit

KT-6500 bid price:

= [(750 x $62) ÷ 1m000] + $27 +12 +$6 + $5

= $46.50 + $27 + $12 + $6 + $5

= $96.50