Question: The Young Company has gathered the following information for a unit of its most popular product:
|
|
|
|
| Direct materials |
$ |
12 |
|
| Direct labor |
|
6 |
|
| Overhead (40% variable) |
|
20 |
|
| Cost to manufacture |
|
38 |
|
| Desired markup (50%) |
|
19 |
|
| Target selling price |
$ |
57 |
|
|
The above cost information is based on 11,400 units. A distributor has offered to buy 3,100 units at a price of $39 per unit. The distributor claims this special order would not disturb regular sales at $57. Special packaging and other selling expenses would be an additional $0.50 per unit for the special order. How many units of regular sales could be lost before this contract is not profitable?
A) 1,250 units.
B) 3,100 units.
C) 0 units.
D) 1,550 units.