Asked by SamanthaRey Colón on May 13, 2024
Verified
A company is currently operating at 60% capacity producing 10,000 units.Cost information relating to this current production is shown in the following table:
The company has been approached by a customer with a request for a special order for 5,000 units.What is the minimum per unit sales price that management would accept for this order if the company wishes to increase current profits?
Special Order
A special order refers to a one-time order that is not part of the regular, ongoing business operations and usually requires consideration of additional costs and pricing.
Capacity
The maximum level of output that a company can sustain to make a product or provide a service.
Sales Price
The amount of money charged for a product or service, which can vary based on demand, market conditions, and production costs.
- Acquire knowledge on the methodology of decision-making concerning special orders and pricing policies.
Verified Answer
$6 + $4.12 + $2.23 = $12.35 incremental costs
Any sales price that exceeds the $12.35 incremental costs will increase current profits.
Learning Objectives
- Acquire knowledge on the methodology of decision-making concerning special orders and pricing policies.
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