Question
A firm has received an additional order for 50,000 units of product X at $20. The firm is currently operating at practical capacity of 600,000
A firm has received an additional order for 50,000 units of product X at $20. The firm is currently operating at practical capacity of 600,000 units. To meet this order, new equipment at a cost of $200,000 would have to be purchased, and this equipment would have to be scrapped after the order had been filled. The firm currently sells product X for $50 per unit, has variable costs of $15.80, and fixed costs of $600,000. Assuming the firm had been aggressively seeking the business of the customer who requested the special order, what would be the minimum price that the firm would be prepared to charge?
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