Problem
Noyak Manufacturing Company has a normal production capacity of 39.200 units per month. Because of an excess amount of inventory on hand, it expects to produce only 31,600 units in July. Monthly fixed costs and expenses are $117,600 ($3 per unit at normal plant capacity) and variable costs and expenses are $7.00 per unit. The present selling price is $14.00 per unit. The company has an opportunity to sell 8200 additional units at $10 per unit to a company who plans to market the product under its own brand name in a foreign market. The additional business will not affect the regular selling price or quantity of sales of Novak Manufacturing Company.
Prepare a differential analysis for the proposal to sell at the special price.