Question
A prospective customer has approached your company to purchase 100 units of the backpacks that you produce. They asked if you would sell them for
A prospective customer has approached your company to purchase 100 units of the backpacks that you produce. They asked if you would sell them for $38 a piece. The backpacks typically sell for $65 each. The following information is available for the normal activity for your backpack production:
Sales price per unit | $65 |
---|---|
Variable expenses: | |
Variable product costs | $30 |
Variable selling costs | $5 |
Fixed costs: | |
Total FMOH | $100,000 |
Total selling and administrative costs | $85,000 |
The firm will NOT incur any variable selling costs for this order, that is the only relevant costs would be the variable product costs.
You have the capacity to produce these backpacks within your relevant range without hurting your normal sales. Given this information and that fact that you will breakeven with your normal activity, you:
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started