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11 May, 22:48

Units produced and sold 600,000 units Selling price $ 35 / unit Variable manufacturing costs $ 20 / unit Fixed manufacturing costs $ 1,200,000 / yr. Variable selling and administrative costs $ 6 / unit Fixed selling and administrative costs $ 950,000 / yr. Geneva receives a purchase order to make 5,000 dolls as a one-time event. The good news is that this order is during a period when Geneva does have sufficient excess capacity. What is the lowest selling price Geneva should accept for this purchase order?

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  1. 11 May, 23:58
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    The lowest selling price Geneva should accept for this purchase order is $20 per unit

    Explanation:

    Geneva produced dolls with Variable manufacturing costs $20 per unit.

    Geneva receives a purchase order to make 5,000 dolls as a one-time event and this order is during a period when Geneva does have sufficient excess capacity.

    Fixed cost did not change and there was no Variable selling and administrative costs for this order.

    The lowest selling price Geneva should accept for this purchase order = Variable manufacturing costs = $20 per unit
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