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ACTG2020_Week5 2014 Ch12CMD (1)

relevant costs will usually be the incremental costs

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Unformatted text preview: ess capacity . . . Same as above, but opportunity cost of using the firm’s facilities for the special order are also relevant. Quick Check Northern Optical ordinarily sells the X-lens for $50. The variable production cost is $10, the fixed production cost is $18 per unit, and the variable selling cost is $1. A customer has requested a special order for 10,000 units of the X-lens to be imprinted with the customer’s logo. This special order would not involve any selling costs, but Northern Optical would have to purchase an imprinting machine for $50,000. (see the next page) LO 2 Quick Check What is the rock bottom minimum price below which Northern Optical should not go in its negotiations with the customer? In other words, below what price would Northern Optical actually be losing money on the sale? There is ample idle capacity to fulfill the order and the imprinting machine has no further use after this order. a. $50 b. $10 c. $15 d. $29 LO 2 Joint Costs In some industries, a number of end products are produced from...
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