Question
Mr. Puffin received a special order request from one of his best customers, Mrs. Penguin. She loves pumpkin muffins and wants to know if Mr.
Mr. Puffin received a special order request from one of his best customers, Mrs. Penguin. She loves pumpkin muffins and wants to know if Mr. Puffin could make her 100 pumpkin muffins for her party this Saturday. Mr. Puffin decides he could make these muffins before the shop opened on Saturday morning. Mr. Puffin will have an UberEats driver deliver his muffins to the party, which will cost him $1 per mile. Mrs. Penguins party is 15 miles away from the shop. No sales commissions will be incurred. Below is information related to a pumpkin muffin.
Selling price per muffin | $9.50 |
Ingredients cost per muffin | $3.33 |
Labor cost per muffin | $0.83 |
Sales commissions per muffin | $0.30 |
Fixed costs for the month | $11,000 |
- What are the relevant costs for this decision?
- Should Mr. Puffin accept the order?
- Since Mrs. Penguin is a good customer, could Mr. Puffin charge her less than the standard selling price for pumpkin muffins? If so, what is the minimum price acceptable to Mr. Puffin?
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