When considering special order decisions and calculating the lowest selling price based on the information below:

Kevco produces a lightweight travel mug that sells for $4.95. The full costs associated with this product are:

variable direct costs of $2.56

$140,000 in manufacturing overhead (MOH), of which $80,000 is fixed

Kevco currently produces and sells 100,000 mugs per year.

A local sports team wants to place a one-time order for 20,000 mugs with special graphics illustrating some of its key players and the team mascot.

Kevco can buy the necessary equipment and engage the service of a graphic designer at a cost of $30,000. As well, the special work would increase variable costs by $0.50 per mug.

Would there be any opportunity costs?

Answer rating: 100% (QA)

Total variable costs per mug will be Variable direct costs per mug Additional variable co... View the full answer