Question
ZBar Supplies is currently producing 20,000 tape dispensers per month, but has the capacity to produce 25,000 tape dispensers without incurring any additional fixed costs.
ZBar Supplies is currently producing 20,000 tape dispensers per month, but has the capacity to produce 25,000 tape dispensers without incurring any additional fixed costs. The selling price is $5.00 per dispenser and variable cost per unit is $2.00. Total fixed costs are $35,000. Marathon Corporation approaches ZBar with a proposal to buy 4,000 dispensers at a price of $4.25 per unit. Prepare the incremental analysis that ZBar should use to evaluate this situation. Assuming that other customers are not affected, should ZBar accept Marathons offer?
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