Edit:

Leeraner Golf Specialties (LGS), a German company, manufactures a variety of golf paraphernalia, such as head covers for woods, embroidered golf towels, and umbrellas. LGS sells all its products exclusively in Europe through independent distributors. Given the popularity of Tiger Woods, one of LGSs more popular items is a head cover in the shape of a tiger.

LGS is currently making 500 tiger head covers a week at a per unit cost of 4,30 , which includes both variable costs and allocated fixed costs. LGS sells the tiger head covers to distributors for 5,05 . A distributor in Japan, Tamagotchi Imports, wants to purchase 100 tiger head covers per week from LGS and sell them in Japan. Tamagotchi offers to pay LGS 2,80 per head cover. LGS has enough capacity to produce the additional 100 tiger head covers and estimates that if it accepts Tamagotchis offer, the per unit cost of all 600 tiger head covers will be 3,90 . Assume the cost data provided (4,30 and 3,90 ) are accurate estimates of LGSs costs of producing the tiger head covers. Further assume that LGSs variable cost per head cover does not vary with the number of head covers manufactured.

Required:

To maximize firm value, should LGS accept Tamagotchis offer? Explain why or why not.

Given the data in the problem, what is LGSs weekly fixed cost of producing the tiger head covers?

Besides the data provided above, what other factors should LGS consider before making a

decision to accept Tamagotchis offer?