Neptune Company has developed a small inflatable toy that it is anxious to introduce to its customers. The company's Marketing Department estimates that demand for the new toy will range between 15,000 units and 35,000 units per month. The new toy will sell for $3.00 per unit. Enough capacity exists in the company's plant to produce 18,000 units of the toy each month. Variable expenses to manufacture and sell one unit would be $1.00 , and incremental fixed expenses associated with the toy would total $30,000 per month.

 

Neptune has also identified an outside supplier who could produce the toy for a price of $1.75 per unit plus a fixed fee of $15,000 per month for any production volume up to 20,000 units. For a production volume between 20,001 and 40,000 units the fixed fee would increase to a total of $30,000 per month.