Question
Glow Sticks Corporation manufactures and sells glow-in-the-dark necklaces for $10 each. The company has the capacity to produce 25,000 necklaces in a year, but is
Glow Sticks Corporation manufactures and sells glow-in-the-dark necklaces for $10 each. The company has the capacity to produce 25,000 necklaces in a year, but is currently producing and selling 20,000 necklaces per year. The company currently is incurring the following costs at its current production level of 20,000 necklaces:
Variable manufacturing costs | $ 60,000 |
Fixed manufacturing costs | $ 90,000 |
Variable selling and administrative costs | $ 75,000 |
Fixed selling and administrative costs | $ 50,000 |
An amusement park is interested in purchasing the excess capacity of 5,000 necklaces if it can receive a special price. This special order would not affect Glow Sticks Corporation's regular sales or its cost structure. Glow Sticks Corporation's profits would increase from this special order if the special order price per necklace is greater than:
$6.75. | ||
$13.75. | ||
$5.40. | ||
$7.50. |
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