Self-test Jason Ltd is a company with only one product, and spare capacity – that is, it could make and sell more if only there was a greater demand for the product.

We are given the following information:

Normal production Selling price per unit 40 Total variable costs per unit 30 Units demanded 5,000 The fixed costs of Jason Ltd are £40,000.

Jason Ltd has now received an order for an additional 1,000 units but the purchaser is only willing to pay £36 per unit for these extra 1,000 units. What should the company do with this extra order at the lower price? Show all the calculations necessary to arrive at your conclusion.