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Alex Corporation provided the following information regarding its only product: Consider each of the following INDEPENDENT scenarios: a. What would be the effect on operating
Alex Corporation provided the following information regarding its only product: Consider each of the following INDEPENDENT scenarios: a. What would be the effect on operating income of accepting a special order for 1,000 units at a sale price of $55 per product assuming additional fixed manufacturing overhead costs of $7,000 would be incurred? Should the order be accepted? b. Alex Corporation has been approached by a company wanting to purchase 3, 500 units at a sales price of $55 per unit. Does Alex Corp. have sufficient excess capacity? What would be the opportunity cost to Alex Corp. of producing the 3, 500 unit one-time special order? Suppose Alex Corp. had been working at less than full capacity, producing and selling 10,000 units, at the time that the one-time special order offer in item "b" was made. Calculate the minimum price per unit that Alex Corp. would accept under these conditions. (Ignore the previous selling price.)
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