Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
Michelle Inc makes
Michelle Inc makes... ink. Michelle normally sells black ink cartridges for $5 each. These cartridges have a variable cost of $2 and an average fixed cost of $1 per unit based on the 50,000 units Michelle normally makes. Shawn approaches Michelle with an offer to purchase 5,000 blue ink cartridges for $4 each. Each cartridge requires an additional $.10 in material (variable cost), and Michelle will have to spend $1,000 in total cleaning the machines that produces the ink cartridges in order to fulfill the order.
1. How much will Michelle's income change (use a negative number if it decreases).
2.What price is required for Michelle to break-even on the special order (make no profit)?
Expert Solution
1)
Offer price = 5000 * 4 = 20000
Cost for 5000 catridges = [5000*2.10] + 1000 = 11500
Opportunity cost = 5000 *(5-2) = 15000
Income change = 20000 - (11500 +15000) = - 6500
2)
break-even on the special order
0 = 5000x - (11500 +15000)
26500 = 5000x
x = 26500 /5000 = $5.3
price i required for Michelle to break-even on the special order = $5.3
Archived Solution
You have full access to this solution. To save a copy with all formatting and attachments, use the button below.
For ready-to-submit work, please order a fresh solution below.
