William A. Smith Pest Control, Inc. (WASP) currently provides pest control services to households in the local community. WASP has an opportunity to service 250 customers of another pest control firm that has also been selling in the community. WASP has the capacity to service 1,000 homes. WASP has an effective income tax rate of 30%. WASP's income statement, before consider- ation of the new opportunity, is as follows.

In negotiating a price for the special opportunity, at what amount should WASP set the minimum per-home price?

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Sales (750 homes at $250 per home)...... $187,500 Variable service costs.. Contribution margin Fixed service costs.. Operating income. Income taxes.. Net income 135,000 52,500 30,000 22,500 6,750 $ 15,750