Question

The company received a special-order inquiry from an appliance manufacturer in Spain for 15,000 units of part no. 65. Only $3 of fixed manufacturing will be incurred on the order, and the variable selling costs per unit will amount to only $5. Since Gorski has excess capacity, the minimum price that Gorski should charge the Spanish manufacturer is

Answer 1

It will be a minimun of $5 wich are the variable cost for the product N°65

Step-by-step explanation:

Gorski has excess capacity. His plant do not generate additional fixed cost for taking the order or reject local transactions.

It can accept for their variable cost of$5 or above. This is the relevant cost for the transactions

Accepting for less, will generate a loss, as it is not paying their variable cost

Acception for more, will generate addtional gains

$5 is the indifference point at which is the same to produce or not produce.