Question
Pamela in Bamplona makes bull-repellent scent according to a traditional Spanish recipe, which normally sells at 9 (Euros) per unit. Normal production volume is 10,000
Pamela in Bamplona makes bull-repellent scent according to a traditional Spanish recipe, which normally sells at 9 (Euros) per unit. Normal production volume is 10,000 ounces per month. Average cost is 5 per ounce, of which 2 is direct material and 1 is variable conversion cost. This product is seasonal. After July, demand for this product drops to 6,000 ounces monthly. In November, Umberto offers to buy 1,500 ounces for 6,000. If Pamela accepts the order, she must design a special label for Umberto at a cost of 500. Each label will cost 25 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 1,125
none of the above
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