Salisbury Corporation has been producing and selling 30,000 caps a year. The company has the...
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Salisbury Corporation has been producing and selling 30,000 caps a year. The company has the capacity to produce 40,000 caps with its present facilities. The following information is also available:
Selling price per unit:$35
Variable Manufacturing:$14
Variable selling and Admin:$6
Fixed Manufacturing: $128,000
Fixed Selling and Admin: $56,000
Gilbert Company has contacted Salisbury about purchasing 12,000 units at $24 each. A new customer who wants 20,000 units (all or nothing) right now also contacted Salisbury. Salisbury has to reduce its existing sales when selling either to Gilbert or to the new customer. For the new customer, variable selling and admin costs would not be incurred. Unfortunately, Salisbury cannot sell both to Gilbert Company and the new customer. What is Salisbury's minimum price to accept the offer from the new customer (instead of Gilbert Company)?
Note:I have seen so many different answers for this same question. Please answer this question if you are really sure. Thank you in advance.
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