The price of the new printer is
The price you paid for the old printer is
because it is a past (sunk) cost that cannot be changed, regardless of your
The trade-in value of the old printer is
Paper costs are
because these costs will be the same with either the old printer or the new printer.
The difference between the ink cartridges’ cost for the old printer and ink cartridges’ cost for the new printer is
Incremental Analysis of Special Sales Order
Expected increase in revenues
(20,000 filters × $1.75)
Expected increase in expenses:
Variable manufacturing costs
(20,000 filters × $1.35)
Fixed manufacturing cost
Total expected increase in expenses
Expected decrease in operating income
ACDelco should not accept the special sales order because it will reduce operating income.
SnowDreams should emphasize a cost-plus approach to pricing because it has been able to differentiate its ski resort from others in the
area. Because of its favorable reputation, managers will have some control over pricing. Of course, they still need to consider whether the
cost-plus price is within the range customers are willing to pay.
Using a cost-plus pricing approach, the cost-plus price would be calculated as follows:
Total variable costs (750,000 × $10 per person)
Desired profit ($100 million × 15%)
Divided by number of skiers / snowboarders
Cost-plus price per lift ticket
The cost-plus price is only $5 above competing ski resorts in the area. Given SnowDreams favorable reputation, they should be able to
charge $75 a day without affecting their volume.