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11. (4 pts total: Special Order analysis) Gebura & Vargas (GV), Inc., produces and sells the Falcon brand of quality athletic shoes at a normal
11. (4 pts total: ""Special Order analysis) Gebura & Vargas (GV), Inc., produces and sells the Falcon brand of quality athletic shoes at a normal selling price of $50 per unit (pair). Per unit cost information, based upon an existing capacity level of 300,000 units is provided below: Direct Materials Direct Labor Total Overhead (2/3 of which is S9 $6 S9 a) A special order inquiry to buy 50,000 units was recently received from Chaney & Sulewski (CS), Inc., an overseas distributor. Additional selling costs of $2 per unit (pair) would be incurred by GV to ship the product overseas to CS. GV, Inc has sufficient existing capacity to manufacture the additional units in question. In preparation for difficult negotiations with CS, Inc, what amount should GV, Inc. set as the mininmmm (floor) selling price per unit (to at least recover their relevant costs)? Eiplain your answer b) Referring to part "a", and using the equation method from Chapter 3, what minimum per unit selling price should GV, Inc. charge if the company requires an incremental pretax profit of $100,000 on this special order? Explain your answer, showing all computations below c) Referring to part "a", and using the equation method from Chapter 3, what minimum selling price should GV, Inc. charge if the company requires an incremental after-tax profit of $100,000 on this special order? Assume a 40% income tax rate. d) Referring to part "a", what would be (on a quantitative basis) the mininmm per unit selling price if no excess production capacity existed (i.e. the company is currently producing, and a market exists to sell, all 300,000 pair)? Provide a defendable explanation for this Chp 6 decision No calculations are required
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