Question

Oriole Company incurred the following costs for 62000 units:

Variable costs
$372000
Fixed costs
392000

Oriole has received a special order from a foreign company for 3000 units. There is sufficient capacity to fill the order without jeopardizing regular sales. Filling the order will require spending an additional $6000 for shipping.

If Oriole wants to earn $6000 on the order, what should the unit price be?

Answer 1

=$10

Step-by-step explanation:

Since Oriole Company has enough capacity to produce the 3000 units without jeopardizing regular sales, only variable costs will change.

Variable cost per unit will be the total variable cost divide by units

= variable costs/ total units

=$372,000/62,000

=$6 per unit

for 3000 units, variable cost

= $3000 x 6

=$18,000

the total cost involved will include variable costs + Shipping costs + desired income

=$18,000 + $6000 + $6000

=$30,000

for 3000 units the cost per unit should be $30,000/3000

=$10