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The Plastic Toy Company sells fashion figures. The normal selling price is $19 per unit and costs are as follows: Variable production costs: $5
The Plastic Toy Company sells fashion figures. The normal selling price is $19 per unit and costs are as follows: Variable production costs: $5 per unit Variable marketing costs: $1 per Factory rent (fixed): $100 Administrative costs (fixed): $20 unit The firm currently produces and sells 10 units. The factory it rents has the capacity to produce up to 15 units. Suppose the offer is to purchase 10 additional units at a price of $11 per unit. 1. 2. 3. Do you think the firm should accept the offer? Why or why not? If the firm wants to maintain its current profit, what is the minimum price it can accept for the offer? If the special order price is $11, what is the maximum order size the firm should agree to if it wants the order to increase profits?
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