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 $250 per home)	$187,500
Variable service costs	135,000
Contribution margin	52,500
Fixed service costs	30,000
Operating income	22,500
Income taxes	6,750
Net income	$15,750

In negotiating a price for the special opportunity, at what amount should WASP set the minimum per-home price?

$Answer : minimum per-home price