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Please provide detailed answer, thanks. Saigon Shoes Company (SSC) manufactures and exports shoes. The sales manager is negotiating with a new customer, a French import
Please provide detailed answer, thanks.
Saigon Shoes Company (SSC) manufactures and exports shoes. The sales manager is negotiating with a new customer, a French import company for an order of 450,000 pairs of a specific model for men. The cost accounting records of SSC (compare question 6 ) show that the total cost for stock valuation purposes for such a pair of shoes is USD 6.16, consisting of direct material cost of USD 3, direct labour cost of USD 3 and allocated fixed overheads of USD 0.16 . The employees get a fixed monthly salary, and the company still has some capacity left to produce additional shoes. Normally, one pair of shoes for men is sold at a selling price of USD 9. The new customer is not prepared to pay that price and argues shoes from Bangladesh are considerably cheaper. Required: The sales manager of SSC is unsure what to do and she wants to know from you: a. Which is the lowest price (rounded up to full USD, which still results in a positive contribution) that the company could accept from the new customer, and b. under which conditions your statement would be valid. c. Please also calculate the additional contribution to fixed costs of that order at your suggested lowest selling price. d. What should be the price (rounded up to 2 digits after the decimal point) to that new customer, if SSC would like to achieve a contribution of 675,000 USD for that specific orderStep by Step Solution
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