The Mighty Music Company produces and sells a desktop speaker for $320. The company has the capacity to produce 72,000 speakers each period. At capacity, the costs assigned to each unit are as follows: $$\begin{array} { l c }
\text { Unit level costs } & \$ 155 \
\text { Product level costs } & \$ 37 \
\text { Facility level costs } & \$ 27
\end{array}$$ The company has received a special order for 23,000 speakers. If this order is accepted, the company will have to spend $32,000 on additional costs. Assuming that no sales to regular customers will be lost if the order is accepted, at what selling price will the company be indifferent between accepting and rejecting the special order? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Question

The Mighty Music Company produces and sells a desktop speaker for $320. The company has the capacity to produce 72,000 speakers each period. At capacity, the costs assigned to each unit are as follows: $$\begin{array} { l c } 
\text { Unit level costs } & \$ 155 \
\text { Product level costs } & \$ 37 \
\text { Facility level costs } & \$ 27
\end{array}$$ The company has received a special order for 23,000 speakers. If this order is accepted, the company will have to spend $32,000 on additional costs. Assuming that no sales to regular customers will be lost if the order is accepted, at what selling price will the company be indifferent between accepting and rejecting the special order? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Quizplus · Accepted Answer

To find the indifference price, calculate the total relevant costs for the special order, which include unit-level costs and additional costs. The unit-level cost per speaker is $155, and the additional cost is $32,000. For 23,000 speakers, the total unit-level cost is $155 * 23,000 = $3,565,000. Adding the additional cost, the total cost is $3,565,000 + $32,000 = $3,597,000. Dividing this by 23,000 speakers gives the indifference price: $3,597,000 / 23,000 = $156.39.

The Mighty Music Company Produces and Sells a Desktop Speaker