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Question
Geneva Company manufactures dolls that are sold to various customers. The companyworks at full capacity for half the year to meet peak demand, and operates at 80% capacity for the other half of the year. The following information is provided:Units produced and sold 600,000 units
Selling price $35/unit
Variable manufacturing costs $20/unit
Fixed manufacturing costs $1,200,000/yr.
Variable selling and administrative costs $6/unit
Fixed selling and administrative costs $950,000/yr
Geneva receives a purchase order to make 5,000 dolls as a one-time event. The good news is that this order is during a period when Geneva does have excess capacity. What is the lowest selling price Geneva should accept for this purchase order?
A. $35.00
B. $26.00
C. $29.50
D. $23.50
Answer
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