Manufacturing a Car

Materials:

-steel

-plastic

-rubber

Glass

Labor:

-assembly

-painting

-testing

The total cost of making a car is:

Product costs:

Materials: $5,000

Labor: $800

Utilities: $300

Period costs:

Supervisor salary: $1500

Building rent: $1000

Advertising: $100

The total cost of making a car is $8,700

Suppose a customer offers you a huge contract for your product. This customer will pay you 10% less than your normal charge, but will order 5,000 units of your product. Using CVP analysis and the costs, should you take the offer or not? (This is a special order decision.)