Landor Appliance Corporation makes and sells electric fans. Each fan regularly sells for $48. The following...

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Accounting

Landor Appliance Corporation makes and sells electric fans. Eachfan regularly sells for $48. The following cost data per fan isbased on a full capacity of 151,000 fans produced each period.
Direct materials $ 7
Direct labor $ 9
Manufacturing overhead (50% variable and 50% unavoidablefixed) $ 6
A special order has been received by Landor for a sale of 25,000fans to an overseas customer. The only selling costs that would beincurred on this order would be $6 per fan for shipping. Landor isnow selling 126,000 fans through regular channels each period.Assume that direct labor is an avoidable cost in this decision.What should Landor use as a minimum selling price per fan innegotiating a price for this special order?

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3.8 Ratings (358 Votes)

Answer In the given question we are required to compute the minimum selling price per fan Landor should use in negotiating a price for this special order Hence the minimum price of a product to be equal to thesum of the additional costs that are incurred as a result of acceptance of an order decision ie which can be avoided See Answer

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Direct materials	$	7
Direct labor	$	9
Manufacturing overhead (50% variable and 50% unavoidablefixed)	$	6