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ClearAir Company is a manufacturer of air purifier. The company has the capacity to produce 8,000 air purifiers per year. The normal selling price of
ClearAir Company is a manufacturer of air purifier. The company has the capacity to produce 8,000 air purifiers per year. The normal selling price of an air purifier is $450 per unit. The company currently produces and sells 6,000 air purifiers per year. The cost information for the current level of activity is provided as follows: The city government has offered to purchase 1,200 air purifiers from the company for the city's public libraries. Accepting this special order would not affect the company's regular business nor its fixed costs. Given that there would be no sales commissions on this order, the variable selling expense would be reduced by 40%. However, the city government requires the company to conduct an additional quality test of all 1,200 air purifiers, which costs $24,000 in total. Required: (Round all the answer to two decimal places) (d) Compute the break-even price for this special order. (4 marks) (e) Assume that ClearAir wants to achieve an incremental profit of $30,000 from this special order, compute the minimum price that ClearAir should charge on this special order. (3 marks) Refer to the original data. Suppose that the production capacity of ClearAir were only 6,800 purifiers instead of 8,000 purifiers. Compute the break-even price for this special order
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