At the end of the year the production manager is taking inventory and finds 600 units of an older model of invisible fencing tha
t the company no longer manufactures. These obsolete units can be disposed of through their regular channels, thereby incurring variable marketing expenses. What is the lowest price that they should accept for these obsolete units, realizing that if they do not sell them these units will have to be thrown away. (Show all supporting calculations).
1 answer:
Answer: $12
Explanation:
In selling the obsolete goods, the company will incur Variable Marketing costs and the alternative will be to throw the goods away.
The relevant costs they will incur are therefore the Variable Marketing costs alone.
The lowest amount that a company should accept for a good is the price that equals it's cost so that they may at least Break-Even.
Seeing as the Variable Marketing Costs are the only relevant cost then the lowest they should accept is the Variable Marketing Costs of $12.
You might be interested in
The selling price of the price that is offered to the buyer of the goods. The selling price of the car should be $<u><em>75,000</em></u>.
<h3>What is the selling price?</h3>The selling price is the ultimate value of the goods the seller is willing to offer to the buyer at the time of sale. It is determined by adding up the profit margin to the actual cost of the goods.
The computation of the selling price of the car:
Given,
- Cost price =$60,000
- Margin =25%
Therefore, if Sherry wants to make 25% on the sale of each car then the car must be sold at $75,000 each.
Learn more about selling price, here: