Coldwater Company incurred the following costs for 70,000 units: Variable costs $420,000 Fixed costs 392,000 Coldwater has received a special order from a foreign company for 3,000 units. There is sufficient capacity to fill the order without jeopardizing regular sales. Filling the order will require spending an additional $6,300 for shipping. If Coldwater wants to earn $6,000 on the order, what should the unit price be

Question

Sharon Barajas

Business

2 May, 17:07

Coldwater Company incurred the following costs for 70,000 units: Variable costs $420,000 Fixed costs 392,000 Coldwater has received a special order from a foreign company for 3,000 units. There is sufficient capacity to fill the order without jeopardizing regular sales. Filling the order will require spending an additional $6,300 for shipping. If Coldwater wants to earn $6,000 on the order, what should the unit price be

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Answers (1)

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Kamryn Pollard · Answer 1

The correct answer is $10.10

Explanation:

According to the scenario, computation of the given data are as follows:

First we calculate the Variable cost, then

Variable cost per unit = $420,000 : 70,000 units

= $6 per unit

Let selling price be "x"

Contribution = Cost of shipping + Required profit

Where, Contribution = (Selling price - Variable cost) * Units

So, By putting the value, we get

(x - $6) * 3,000 = $6,300 + $6,000

3000x - $18,000 = $12,300

x = ($12,300 + $18,000) : 3,000

So, x = $30,300 : 3,000

= $10.10