A Manufacturer Has Been Asked to Fill a Special Order

Multiple Choice

A manufacturer has been asked to fill a special order at $7.25 per unit. The regular price is $10 per unit. No other use of the currently idle capacity can be found. The manufacturer's usual variable costs per unit are $3.50 for direct materials, $2.00 for direct labour, $1.00 for variable overhead, and $0.50 for sales commission. No sales commission would be paid on this special order. The average fixed overhead cost per unit is $0.25.
Assume there is no excess capacity (i.e., the company can sell every unit that it produces to regular customers) . Under the general decision rule, the minimum price per unit for this special order would be:

A) $10.00
B) $7.25
C) $5.75
D) $6.50