Asked by Harmanveer Singh on May 16, 2024
Verified
A company is currently operating at 65% capacity producing 12,000 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 2,000 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
An order for goods or services that is outside the scope of regular operations, often requiring customization or special handling.
Capacity
The highest level of production a business can maintain to produce a good or offer a service.
Sales Price
The sales price is the amount a customer pays for a product or service, determining the revenue generated from sales transactions.
- Comprehend the process involved in making decisions about special orders and strategies for pricing.
Verified Answer
$2.30 + $0.87 + $0.91 = $4.08 incremental costs
Any sales price that exceeds the $4.08 incremental costs will increase current profits.
Learning Objectives
- Comprehend the process involved in making decisions about special orders and strategies for pricing.
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