Jupiter Industries manufacturers fishing poles specifically designed for deep water fishing. Coastal Shores is one of Jupiter's key customers. Coastal would like to offer a pole at a highly discounted price as a special during an upcoming fishing tournament. Coastal estimates that an additional 500 poles can be sold provided the price is right. This sale is not expected to have much of an impact, if any, on the normal sales of the store. To determine the best price that they can offer to Coastal on this order, Jupiter should calculate the _____.
A) Fixed cost per unit.
B) Average total cost.
C) Marginal cost.
D) Total cost.
E) Contribution margin.

Question

Quizplus · Accepted Answer

Jupiter should calculate the marginal cost, which is the cost of producing one additional unit. This will help determine the lowest price they can offer without incurring a loss on the additional poles specifically for the tournament, without significantly affecting the cost structure of their regular sales.

Jupiter Industries Manufacturers Fishing Poles Specifically Designed for Deep Water