Submit your answer in a single Excel file. Where calculations are required, it must be readily apparent to the grader how you arrived at your answer. Verbal answers should be expressed clearly and concisely.

Major Mills is a large manufacturer of breakfast cereal. One of its most popular products is Choco-Bombs, which sells at wholesale for $50/case. The cost to produce is $36.30 per case, as follows: Ingredients, $8.40; Packaging, $4.70; Labor, $3.20; Overhead, $20 (30% variable). A large grocery retailer has approached Major Mills with a proposal to create a house-brand version of Choco-Bombs. The retailer offers to purchase 10,000 cases per month of the house brand for one year, after which the contract could be renewed. The retailer will purchase the house brand for $32/case. A slight change in the recipe would reduce ingredients cost by 40 cents per case. Packaging cost would increase by 10 cents per case because of a new ink required. There would be an initial setup cost of $15,000. Because Major Mills has excess capacity of only 9,000 cases per month on the production line, they would lose 1,000 cases per month of sales of Choco-Bombs.

Would accepting the retailer