Asked by
Arshad Nazim
on Dec 05, 2024
Verified
A firm has excess capacity, and has received an order for 50 000 units at $20 each over and above its normal production activity of 600 000 units. To meet this order, new equipment at a cost of $200 000 would have to be bought, and this equipment would have to be scrapped after the order had been filled. The firm currently sells for $50 per unit, has variable costs of $15.80, and fixed costs of $600 000. Assuming the firm had been aggressively seeking the business of the customer who requested the special order, what would be the minimum price that the firm would be prepared to charge?
A) $15.80
B) $50
C) $27.80
D) $19.80
Aggressively Seeking
Involves actively and intensely pursuing a specific goal or outcome, often in a competitive context.
Special Order
An order for goods or services that is outside the company's standard offerings, often requiring custom pricing and production considerations.
Minimum Price
The lowest price at which a product or service can be sold, often determined by costs, competition, or regulation.
- Investigate the influence of product assortment choices on business earnings with respect to manufacturing restrictions.
- Comprehend the essential nature of labor and material expenditures in analyzing pricing structures and profit margins.
Verified Answer
AS
Learning Objectives
- Investigate the influence of product assortment choices on business earnings with respect to manufacturing restrictions.
- Comprehend the essential nature of labor and material expenditures in analyzing pricing structures and profit margins.