Taylor Electronics, Inc. (TEI), has been approached by a new customer who wants to place a one-tirne order for a component similar to one that TEI makes for another custorner. Existing sales will not...

What is the minimum unit price at which TEI would be willing to accept the special order?

Extracted text: Taylor Electronics, Inc. (TEI), has been approached by a new customer who wants to place a one-tirne order for a component similar to one that TEI makes for another custorner. Existing sales will not be affected by acceptance of this order. TEI has a policy of setting its targeted selling price at 60 percent over full manufacturing cost. The manufacturing costs and the targeted selling price for the component currently being made are as follows: Direct materials Direct labor $ 2.30 3.60 Variable manufacturing overhead (75% of direct labor cost) Fixed manufacturing overhead (150% of direct labor cost) Total manufacturing cost Markup (60% of full manufacturing cost) Targeted selling price 2.70 5.40 $14.00 8.40 $22.40 TEI has excess capacity to produce the quantity of the component desired by the new custorner. The direct materials used in the component for the new customer would cost the manufacturer $.25 less than those in the component currently being made. The variable selling expenses (packaging and shipping) would be the same as for the component currently being made, or $.90 per unit.