Minor Electric has received a special one-time order for 900 light fixtures (uni
ID: 2575391 • Letter: M
Question
Minor Electric has received a special one-time order for 900 light fixtures (units) at $9 per unit. Minor currently produces and sells 4,500 units at $10.00 each. This level represents 75% of its capacity. Production costs for these units are $10.50 per unit, which includes $7.00 variable cost and $3.50 fixed cost. To produce the special order, a new machine needs to be purchased at a cost of $575 with a zero salvage value. Management expects no other changes in costs as a result of the additional production. If Minor wishes to earn $925 on the special order, the size of the order would need to be:
Explanation / Answer
The size of the order would need to be =(575+925)/(9-7)= 750