The Concord packages and distributes three grades of animal feed. The material cost per tonne...
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Accounting
The Concord packages and distributes three grades of animal feed. The material cost per tonne and estimated annual sales for each of the products are listed here:
Material
Estimated
Product
Cost
Sales
Super Premium
$
10.25
1,800
tonnes
Premium
8.25
3,200
tonnes
Economy
7.00
4,700
tonnes
The fixed cost of operating the machinery used to package all three products is $ 9,800 per year. In the past, prices have been set by allocating the fixed operating cost to products on the basis of estimated sales in tonnes. The resulting full costs (material costs plus allocated fixed operating cost) are then marked up 100%. The Concord has received an offer from a foreign firm for 1,100 tonnes of the premium-grade feed. Sales to the foreign firm would not affect domestic sales but would require a $ 2,100 increase in fixed production costs.
(c) Using only quantitative information, what is the minimum price that the Concords managers should be willing to accept from the foreign firm?
Price for order:
$
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