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.