Question

Andretti Company has a single product called a Dak. The company normally produces and sells 84,000 Daks each year at a selling price of $58 per unit. The company’s unit costs at this level of activity are given below:

Direct materials	$	9.50
Direct labor		10.00
Variable manufacturing overhead		2.70
Fixed manufacturing overhead		5.00	($420,000 total)
Variable selling expenses		1.70
Fixed selling expenses		3.50	($294,000 total)
Total cost per unit	$	32.40
The company has 900 Daks on hand that have some irregularities and are therefore considered to be "seconds." Due to the irregularities, it will be impossible to sell these units at the normal price through regular distribution channels. What is the unit cost figure that is relevant for setting a minimum selling price? (Round your answer to 2 decimal places.) THANK YOU SO MUCH. SHOWING WORK IS APPRICIATED :)

Answer 1

In this case, Direct materials, Direct labor and Variable manufacturing overhead will be sunk cost as they have already incurred in producing 900 daks.

The only relevant cost will be Variable selling expenses of $ 1.70 as it will be incurred in order to sell these products now.

Answer - $ 1.70