Relevant costs; special order pricing

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Question: Relevant costs; special order pricing Kantrovitz Company is a manufacturer of industrial componen…
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Kantrovitz Company is a manufacturer of industrial components.
One of its products, AP110, is used as a subcomponent in appliance
manufacturing. This product has the following information per
unit:

Question: Relevant costs; special order pricingKantrovitz Company is a manufacturer of industrial componen...

a. Kantrovitz has received a special, one-time
order for 1,000 AP110 parts. Assuming Kantrovitz has excess
capacity, what is the minimum price that is acceptable for
beginning negotiations on this order?
$ per unit

b. Kantrovitz has 5,000 units of AP110 in
inventory that have some defects. The units cannot be sold through
regular channels without a significant price reduction. What
per-unit cost figure is relevant for setting a minimum selling
price on these units?
$ per unit

c. During the next year, sales of AP110 are
expected to be 10,000 units. All costs will remain the same except
that fixed manufacturing overhead will increase by 20 percent and
direct material will increase by 10 percent. The selling price per
unit for next year will be $160. Based on these data, calculate the
total contribution margin generated by part AP110.
$

d. Referring to (a), Kantrovitz has received a
special, one-time order for 1,000 AP110 parts. Assume that
Kantrovitz is operating at full capacity, and that the contribution
of the output would be displaced by the one-time special order.
Using the original data, compute the minimum acceptable selling
price for this order.
$ per unit

Show transcribed image text Selling price Costs Direct material Direct labor Variable manufacturing overhead Fixed manufacturing overhead Shipping and handling Fixed selling and administrative Total per unit cost $150 20 15 12 30 10 90

Selling price Costs Direct material Direct labor Variable manufacturing overhead Fixed manufacturing overhead Shipping and handling Fixed selling and administrative Total per unit cost $150 20 15 12 30 10 90

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