Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribed
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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions