Baseball Products manufactures a single product with the following full unit costs

Baseball Products manufactures a single product with the following full unit costs at a volume of 2,000 units:

Direct materials $   900
Direct labor 360
Manufacturing overhead* 610
Selling expenses (50% variable) 300
Administrative expenses**      290
Total per unit $2,460

 

*Note that per unit manufacturing overhead costs include $840,000 fixed costs

**Note that per unit administrative expenses include $500,000 fixed costs.

A company recently approached Baseball’s management about buying 200 units of product. Baseball currently sells its product to dealers for $2,600 per unit. Capacity is sufficient to produce the extra 200 units. No selling expenses would be incurred on the special order.

What is the minimum price Baseball should charge just to break even on the special order?

Here’s the SOLUTION

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