Question

Incremental Analysis question:

I know the answer is $4.20, but I can't figure out why.

Sandusky Inc. has the following costs when producing 100,000 units:

Variable costs $400,000
Fixed costs 600,000

An outside supplier is interested in producing the item for Sandusky. If the item is produced outside, Sandusky could use the released production facilities to make another item that would generate $100,000 of net income. At what unit price would Sandusky accept the outside supplier’s offer if Sandusky wanted to increase net income by $80,000?

Answer 1

If you are relying on "cut and paste" it does not work here. You will need to type everything out.

Sra

Answer 2

Sorry, here is the question:

Sandusky Inc. has the following costs when producing 100,000 units:
Variable Costs $400,000
Fixed Costs 600,000

An outside supplier is interested in producing the item for Sandusky. If the item is producing outside, Sandusky could use the released production facilities to make another item that would generate $100,000 of net income. At what unit price would Sandusky accept the outside supplier's offer if Sandusky wanted to increase net income by $80,000?

I know the answer is $4.20, but can't figure out how to get that.

Answer 3

Sandusky Inc. has the following costs when producing 100,000 units:
Variable Costs $400,000
Fixed Costs 600,000

An outside supplier is interested in producing the item for Sandusky. If the item is producing outside, Sandusky could use the released production facilities to make another item that would generate $100,000 of net income. At what unit price would Sandusky accept the outside supplier's offer if Sandusky wanted to increase net income by $80,000?