| 1, Farnsworth Television makes and sells portable television sets. Each television regularly sells for $240. The following cost data per television are based on a full capacity of 14,000 televisions produced each period: |
| Direct materials | $85 |
| Direct labor | $65 |
| Manufacturing overhead (70% variable, 30% unavoidable fixed) | $50 |
| A special order has been received by Farnsworth for a sale of 2,300 televisions to an overseas customer. The only selling costs that would be incurred on this order would be $14 per television for shipping. Farnsworth is now selling 7,300 televisions through regular distributors each period. What should be the minimum selling price per television in negotiating a price for this special order? |
$240
$185
$200
$199
Answer
the minimum selling price per television in negotiating a price for this special order = $ 199
Working notes for the above answer is as under
the minimum selling price is the point at which the CMx is $0(where SP = VCx).Therefore, identify the variable costs.
| Particular | Amount in $ |
| Dvariable cost) | 85 |
| DL (variable cost) | 65 |
| VMOH | 35 |
| Shipping | 14 |
| Total VC | 199 |
the minimum selling price per television in negotiating a price for this special order = $ 199
