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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
(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.
d. $29 LO 2 Joint Costs
In some industries, a number of end
products are produced from...
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