Question
Pamela in Bamblona makes bull-repellent scent accordina to a traditional Spanish recipe. which normal sells at 9 (Euros) per unit. Normal production volume is 10.000
Pamela in Bamblona makes bull-repellent scent accordina to a traditional Spanish recipe. which normal sells at 9 (Euros) per unit. Normal production volume is 10.000 ounces per month. Averade cost is 5 per ounce of which 2 is direct material and 1 is variable conversion cost. This product is seasonal. After Julv. demand for this product drops to 6,000 ounces monthl. In November, Umberto offers to buy 1,800 ounces for 8.10C
If Pamela accepts the order, she must design a special label for Umberto at a cost of 800. Each label will cost 30 cents to make and apply. Pamela should:
- accept the order, at a gain of 625
- reject the order at a loss of 1.875
- reject the order at a loss of 2.375
- accept the order, at a gain of 1,360
- reject the order, the new selling price is less than the average cost per ounce
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