Asked by Fort
Please help explain
A manufacturer of motorcycle batteries has a plant capacity of 100,000 per year. Overhead costs are $500,000 per year. Variable costs are $10 per unit. Sales have been running at 50,000 per year at a wholesale price of $25 each. Recently, a large department store offered to purchase an additional 50,000 batteries a year at $20 each. (a) Should they take the offer? Explain why or why not. (b) Suppose the department store offered to buy the entire output for $15. Should they take the offer? Explain why or why not
A manufacturer of motorcycle batteries has a plant capacity of 100,000 per year. Overhead costs are $500,000 per year. Variable costs are $10 per unit. Sales have been running at 50,000 per year at a wholesale price of $25 each. Recently, a large department store offered to purchase an additional 50,000 batteries a year at $20 each. (a) Should they take the offer? Explain why or why not. (b) Suppose the department store offered to buy the entire output for $15. Should they take the offer? Explain why or why not
Answers
Answered by
Lohn
a) no because the company earns less
b) yes, because they company would earn more
b) yes, because they company would earn more
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