Question

at what price will the company be indifferent?

The Varone Company makes a single product called a Hom. The company has the capacity to produce 40,000 Homs per year. Per unit costs to produce and sell one Hom atthat activity level are:
Direct materials $21
Direct labor $11
Variable manufacturing overhead $6
Fixed manufacturing overhead $8
Variable selling expense $10
Fixed selling expense $9
The regular selling price for one Hom is $70. A special order has been received at Varone from the Fairview Company to purchase 6,400 Homs next year at 20% off theregular selling price. If this special order were accepted, the variable selling expense would be reduced by 30%. However, Varone would have to purchase a specializedmachine to engrave the Fairview name on each Hom in the special order. This machine would cost $10,900 and it would have no use after the special order was filled. Thetotal fixed costs, both manufacturing and selling, are constant within the relevant range of 30,000 to 40,000 Homs per year. Assume direct labor is a variablecost.
If Varone can expect to sell 32,000 Homs next year through regular channels, at what special order price per unit from Fairview should Varone be economicallyindifferent between either accepting or not accepting this special order? $56.0 or $36.8 or $53.4 or $46.7

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