Custom Promotions creates customized products for businesses. The per-unit costs for its standard tablet covers are: Direct
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Question:
Custom Promotions creates customized products for businesses. The per-unit costs for its standard tablet covers are:
Direct materials cost per unit: $6
Direct labour cost per unit: $4
Variable overhead cost per unit: $2
Variable selling cost per unit: $4
Average fixed overhead costs per unit: $300
A buyer has approached Custom with a special order for 100 units. The buyer wants a special symbol engraved on each unit. This will increase labour costs by $0.25 per unit, and Custom will incur a cost of $300 for a special tool to complete the engraving. However, no selling costs will be incurred.
What price must be charged for Custom to earn $300 of pre-tax income on the order?
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