Problem:
Dockwiller Inc. manufactures industrial components. One of its products, which is used in the construction of industrial air conditioners, is known as D53. Data concerning this product are given below:
Per Unit Data
Selling price
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Variable selling expense
Fixed selling and administrative expense
The above per unit data are based on annual production of XXX units of the component. Direct labor can be considered to be a variable cost.
A. The company has received a special, one-time-only order for XXX units of component D53. There would be no variable selling expense on this special order and the total fixed manufacturing overhead and fixed selling and administrative expenses of the company would not be affected by the order. Assuming that Dockwiller has excess capacity and can fill the order without cutting back on the production of any product, what is the minimum price per unit on the special order below which the company should not go?
B. Refer to the original data in the problem. What is the current contribution margin per unit for component D53 based on its selling price of $XXX and its annual production of YYY units?