Question
Special Order William A. Smith Pest Control, Inc. (WASP) currently provides pest control services to households in the local community. WASP has an opportunity to
Special Order
William A. Smith Pest Control, Inc. (WASP) currently provides pest control services to households in the local community. WASP has an opportunity to service 250 customers of another pest control firm that has also been selling in the community. WASP has the capacity to service 1,000 homes. WASP has an effective income tax rate of 30%. WASPs income statement, before consideration of the new opportunity, is as follows.
Sales (750 homes at $260 per home) | $195,000 |
Variable service costs | 136,500 |
Contribution margin | 58,500 |
Fixed service costs | 30,000 |
Operating income | 28,500 |
Income taxes | 8,550 |
Net income | $19,950 |
In negotiating a price for the special opportunity, at what amount should WASP set the minimum per-home price?
$Answer minimum per-home price
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