Question
Miss Candy tells you of a discussion she had recently with Professor Hamper where she repeated the need to produce up to the companys maximum
Miss Candy tells you of a discussion she had recently with Professor Hamper where she repeated the need to produce up to the companys maximum capacity of 70,000 doses. Miss Candy mentioned that there is a potential request for an extra 5,000 dose with the selling price of $330. Professor Hamper immediately rejected the order as the company would make a loss on that order. However, she would be prepared to sell the dose on a cost basis for $340 each, provided the order was increased to 15,000 doses.
Additional information:
Usual selling price $340
Variable cost $211
Fixed cost $8,450,000.00
Provide Miss Candy the following information:
(a) Computation of the change in profits from accepting the order for 5,000 doses at $330.
(b) Computation of the change in profits from accepting an order for 15,000 doses at $340.
(c) Indicate, with justification which proposal, if either, should be accepted.
(d) Identification of 2 non-financial factors that should be considered before a final decision is made.
(13 marks)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started