Question
Damon, Inc. currently produces 30,000 sweatshirts each year for its regular customers and charges $30 per sweatshirt. Damon has capacity to produce an additional 5,000
Damon, Inc. currently produces 30,000 sweatshirts each year for its regular customers and charges $30 per sweatshirt. Damon has capacity to produce an additional 5,000 sweatshirts if sales grow in the future. Variable costs total $16 per sweatshirt and annual fixed costs total $60,000. The city of Loveland recently approached the company and proposed a one-time purchase of 1,000 sweatshirts for $24 each. Should Damon accept the special order proposal?
a. No, because total fixed cost will increase by $2000 and total sales will decline by $6000 from this special order
b. Yes, because they will make $8 per shirt from this special order
c. No, because they will lose $6 per shirt from this special order
d. None of the above
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