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?

Answer rating: 100% (QA)

To calculate the price that Custom Promotions must charge to earn a pretax income of 300 on the orde... View the full answer