A company manufactures and sells a single product. The variable cost of the product is Rs 2.50 per unit and all production each month is sold at a price of Rs 3.70 per unit. A potential new customer has offered to buy 6,000 units per month at a price of Rs 2.95 per unit. The company has sufficient spare capacity to produce this quantity. If the new offer is accepted, sales to existing customers are expected to fall by two units for every 15 units sold to the new customer.

Required:

(a) Should the new offer be accepted and if accepted what would be the overall increase in monthly profit.

(b) In the short-term decision-making context, which ONE of the following would be a relevant cost?

- Specific development costs already incurred.
- The cost of special material which will be purchased.
- The original cost of raw materials currently in inventory which will be used on the project.

(c) Briefly illustrate what you understand by the term "sunk cost".

Posted Date: 10/22/2013 12:56:42 AM | Location : United States

Ask an Expert

Related Discussions:- Short-term decision-making problem, Assignment Help, Ask Question on Short-term decision-making problem, Get Answer, Expert's Help, Short-term decision-making problem Discussions

Write discussion on Short-term decision-making problem
Your posts are moderated

Write your message here..

Related Questions

Selective dissemination of information (sdi), Selective Dissemination of In... Selective Dissemination of Information (SDI): The SDI is a type of current awareness service, the objective of which is to keep users of the system informed of new development

Describe the types of business policies, Question 1 What do you mean by fa... Question 1 What do you mean by family business? Explain the family business life cycle Question 2 Describe the types of business policies Question 3 List and expla

Quadrants can be useful to the ministry of agro-industry, QUESTION Anso... QUESTION Ansoff's Matrix is described as a very useful tool that can be used in nearly every scenario. Define and describe Ansoff's Matrix. Explain how each of the four Quadran

Outline various steps of the policy analysis process, QUESTION 1 Policy... QUESTION 1 Policy implementation is the most critical stage of the policy process. Critically analyse some of the main constraints that hinder the implementation of public poli

Research Methodology and Statistical Analysis , Differentiate between Hist... Differentiate between Historigrams and Histogram

Science, scientists use what to find answers to problems scientists use what to find answers to problems

Penalty, P enalty Penalties should aim at fixing a problem when it ari... P enalty Penalties should aim at fixing a problem when it arises and ensuring that it does not recur. Guidelines to note while stipulating penalties are: Penalties shou

Oral presentation, Oral Presentation It provides to spoken, rather than... Oral Presentation It provides to spoken, rather than written communication where information is expressed to a group. The spoken word is frequently augmented by visual aids suc

Location site -preliminary considerations -library building, Location Site ... Location Site -Preliminary Considerations of Library building-library managment Location is  important for homogeneous  services, site  selection and choice of community,  reg

Identification based trust and calculus based trust, Question 1 Differe... Question 1 Differentiate between identification based trust and calculus based trust. Question 2 M. Thomas, the Managing Director of a company has recently attended a w