At a management meeting, you just finished presenting your cost analysis report, showing unit costs last year for 60,000 widgets produced were $435.00. The sales manager then complained that she was going to lose a special overseas sale because the customer had indicated they could only pay $425.00. She knew from sources that no competitor would be bidding below $440, and she complained that if the company had better cost control, there would be more profit for everyone. The production manager also would like to take the extra job, since even with the extra production, the plant would be under-capacity.
Required:What type of information would you need in order to be able to determine if the extra order could be profitably produced if the selling price was held to $425 per unit?

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The Answer of At a management meeting, you just finished presenting your cost analysis report, showing unit costs last year for 60,000 widgets produced were $435.00. The sales manager then complained that she was going to lose a special overseas sale because the customer had indicated they could only pay $425.00. She knew from sources that no competitor would be bidding below $440, and she complained that if the company had better cost control, there would be more profit for everyone. The production manager also would like to take the extra job, since even with the extra production, the plant would be under-capacity.
Required:What type of information would you need in order to be able to determine if the extra order could be profitably produced if the selling price was held to $425 per unit?

At a Management Meeting, You Just Finished Presenting Your Cost