7.What is the lowest possible price you could offer to this potential customer (You know that we have sufficient capacity, without working overtime and without adding any new equipment, to make this order)? Please show the calculations.
You have been approached by a potential customer who could bring considerable business. She says, "I'd like to find an alternative vendor for my future orders of 5,000/yr., but their pricing to me must be competitive."
Your CFO has supplied you with the following information. Current product standard costs are as follows:
- $1,400/unit direct material
- $400/unit direct labor
- $200/unit variable overhead
•$200/unit fixed overhead (this figure is the result of budgeted fixed overhead of $2,000,000 and budgeted sales volume of 10,000 units)
can you show me the calculations