2C2I GARDENER COMPANY CURRENTLY IS USING ITS FULL CAPACITY OF 25,000...

241.

CSO: 2C2c

LOS: 2C2i

Gardener Company currently is using its full capacity of 25,000 machine hours to

manufacture product XR-2000. LJB Corporation placed an order with Gardener for the

manufacture of 1,000 units of KT-6500. LJB would normally manufacture this

component. However, due to a fire at its plant, LJB needs to purchase these units to

continue manufacturing other products. This is a one time special order. The following

reflects unit cost data, and selling prices.

KT-6500

XR-2000

Material

$27

$24

Direct labor

12

10

Variable overhead

6

5

Fixed overhead

48

40

Variable selling & administrative

5

4

Fixed selling & administrative

12

10

Normal selling price

$125

$105

Machine hours required

3

4

What is the minimum unit price that Gardener should charge LJB to manufacture 1,000

units of KT-6500?

a.

$93.00.

b.

$96.50.

c.

$110.00.

d.

$125.00.