Elfving Company produces a single product. The cost of producing and selling a single unit of this product at the
The normal selling price of the product is $71.10 per unit. An order has been received from an overseas customer for 1,000 units to be delivered this month at a special discounted price. This order would have no effect on the company's normal sales and would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $1.50 less per unit on this order than on normal sales. Direct labor is a variable cost in this company.
Suppose the company is already operating at capacity when the special order is received from the overseas customer. What would be the opportunity cost of each unit delivered to the overseas customer?
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...
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