Answered: Lucifer Company sells its product A at…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 6PA: Gent Designs requires three units of part A for every unit of Al that it produces. Currently, part A...

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Lucifer Company sells its product A at a selling price of P42 per unit. Lucifer’s costs per unit based
on the full capacity of 200,000 units are as follows:
Direct materials P 8.00
Direct labor 10.00
Overhead 12.00
Overhead costs were 40% fixed. A special order offering to buy 40,000 units were received from a
foreign distributor. The only selling costs that would be incurred amounts to P6 per unit for shipping
(as oppose to P12 per unit on regular customers). Lucifer has sufficient existing capacity to
manufacture the additional units.

a. What is the minimum selling price per unit that the Company may accept?

b. Assume that the company is already operating at full capacity and could only accommodate the
foreign distributor only by cancelling sales from regular customers, what would be the minimum
selling price?

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