Ignace Timekeepers Inc. manufactures and sells wrist watches. Ignace has the cap
ID: 2490551 • Letter: I
Question
Ignace Timekeepers Inc. manufactures and sells wrist watches. Ignace has the capacity to manufacture and sell 20,000 watches each year but is currently only manufacturing and selling 15,000. The following costs relate to annual operations at 15,000 watches:
Variable Manufacturing Cost $150,000
Fixed Manufacturing Cost $120,000
Variable selling and admin cost $90,000
Fixed selling and admin cost $180,000
Ignace normally sells its watches at $42 each. A discount chain is interested in purchasing Igance's excess capacity of 5,000 watches. This special order would not affect regular sales or the cost structure above. Ignace's profits for the year will increase as long as the price on this special order exceeds: $__________
Explanation / Answer
Variable Cost per Unit Per Unit Manufacturing Cost 150000 10 It is assumed that there wll be no variable selling cost as the special order has been received The price on special order must exceeds the variable cost i.e. $ 10