Answer:
a. profit is lower
b. lowest price $2.29
Step-by-step explanation:
a. We have to analyze how this especial order affect the profit of the company
Profit = Revenue- Total cost = P(x) =(Px * Q)-(FC + vc*Q)
Regular production profit= $2.85 x 18,400 units -$2.60 x 18,400 units=
Regular production profit=4600
Production with special order= (P1 * Q1)+(P2 * Q2)-(FC + vc*Q)
P2= price of special order
Q2= quantity of special order
Q= Q1 +Q2
Production with special order= (P1 * Q1)+(P2 * Q2)-(FC + vc*Q)= $2.85 x 18,400 units +$1.85 x 800 units - $18,400- $1.60 x 19600=
Production with special order= 51888 +1480- $18,400- 30720
Production with special order= 4.248
b.Production with special order= (P1 * Q1)+(P2 * Q2)-(FC + vc*Q) =4600
=51888 +(P2 * 800)- $18,400- 30720 =4600
=(P2 * 800)= 4600- 51888 + $18,400+30720
P2=1.832/800 = 2,29
