Question - Geneva Company manufactures dolls that are sold to various customers. The company works at full capacity for half the year to meet peak demand, and operates at 80% capacity for the other half of the year. The following information is provided. Geneva receives a purchase order to make 5,000 dolls as a one-time event. The good news is that this order is during a period when Geneva does have excess capacity. What is the lowest selling price Geneva should accept for this purchase order?
Units produced and sold 600,000 units
Selling price $35/unit
Variable manufacturing costs $20/unit
Fixed manufacturing costs $1,200,000/yr.
Variable selling and administrative costs $6/unit
Fixed selling and administrative costs $950,000/yr