Cost analysis for pricing decisions. Easton, Inc., has manufactured violin cases since they became popular with gangsters in the 1920s. The regular price of a violin case is $50 each. Easton's controller has prepared cost data on these cases based on a normal selling volume of 20,000 per year:

This week, Ness Corporation moved into Easton's market area. Ness instituted a media campaign designed to lure Easton's customers. Indeed. Ness offered violin cases al one half of Easton's selling price.

Easton estimates that if it meets Ness's price, its volume will increase to 50.

000 cases because people who previously were buying elsewhere would be induced to buy locally. However, if it does not meet Ness's price, Easton's volume will fall to 10,000 cases per year.

a. Prepare a schedule that compares the status quo (price = $50; quantity = 10,000)

with the alternative (price = $25; quantity = 50,000).

b. What should Easton do?

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Direct materials. Direct labor. Overhead Marketing and administrative Total cost $ 7.50 10.00 8.00 (75% fixed) 4.00 (all fixed) $29.50