Direct material $50 Direct labor 20 Overhead (20% variable) 10 Other information:   Sales price 100 SG&A costs (40% variable) 15

Cornerstones of Cost Management (Cornerstones Series)
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Chapter13: The Balanced Scorecard: Strategic-based Control
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Northern Digital Inc.

The Northern Digital Inc. produces a high-quality computer chip. Unit production costs (based on capacity production of 100,000 units per year) follow:

 

Direct material $50
Direct labor 20
Overhead (20% variable) 10
Other information:  
Sales price 100
SG&A costs (40% variable) 15

 

Refer to Northern Digital, Inc. Assume, for this question only, that the Memory Division is operating at a level of 70,000 chips per year. What is the minimum price that the division would consider on a "special order" of 1,000 chips to be distributed through normal channels?

Select one:
a. $95
b. $100
c. $81
d. $78
 
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