Question
Geneva Company manufactures dolls that are sold to various customers. The companyworks at full capacity for half the year to meet peak demand, and operates
Geneva Company manufactures dolls that are sold to various customers. The companyworks at full capacity for half the year to meet peak demand, and operates at 80% capacity for the other half of the year. The following information is provided: Units produced and sold 600,000 units Selling price $35/unit Variable manufacturing costs $20/unit Fixed manufacturing costs $1,200,000/yr. Variable selling and administrative costs $6/unit Fixed selling and administrative costs $950,000/yr Geneva receives a purchase order to make 5,000 dolls as a one-time event. The good news is that this order is during a period when Geneva does have excess capacity. What is the lowest selling price Geneva should accept for this purchase order?
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