Question
Fox Company has just received an unexpected order from a customer for 1,000 units of a new product. The product will have total variable costs
Fox Company has just received an unexpected order from a customer for 1,000 units of a new product. The product will have total variable costs of $15.00 per unit. Fox Company will have to rent a machine for $10,000, pay overtime amounting to $5,000 to a supervisor to handle this order, and fixed packaging and shipping costs of $2,000 for this order.
The production supervisor has just advised that to complete this special order, production and sales of 500 units of an existing product, which is sold for $35.00 per unit and has a variable cost of $23 per unit, will have to be sacrificed.
The minimum (floor) total price that Fox Company should charge for this order is:
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