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Da Nang Textil Company (DNTC) manufactures and exports a variety of suits for men. The sales manager is negotiating with a new customer, a Chinese
Da Nang Textil Company (DNTC) manufactures and exports a variety of suits for men. The sales manager is negotiating with a new customer, a Chinese import company, for an order of 800,000 units of a black model. The cost accounting records of DNTC show that the total cost for stock valuation purposes for such a suit is USD 16.52, consisting of direct material cost of USD 7, direct labour cost of USD 8 and allocated fixed overheads of USD 1.52. The employees get a fixed monthly salary, and the company still has some capacity left to produce additional suits. Normally, one suit is sold at a selling price of USD 24. The new customer is not prepared to pay that price and argues suits from Bangladesh are considerably cheaper. Required: The sales manager of DNTC is unsure what to do and she wants to know from you: a) Which is the lowest price (full USD amount that still results in a positive contribution) which the company could accept from the new customer, and b) under which conditions your statement would be valid. c) Please also calculate the additional contribution to profits of that order at your suggested lowest selling price. d) What should be the price to that new customer, if DNTC would like to achieve a contribution of 2,000,000 USD for that specific order. Please use increments of 1 full USD for prices and your
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