Question

The Walls Candy Company manufactures candy that is sold to food distributors. The company produces at full capacity for six months each year to meet peak demand during the “ candy season” from Halloween through Valentine’s Day. During the other six months of the year, the manufacturing facility operates at 75% of capacity. The Walls Candy Company provides the following data for the year:
Cases of candy produced and sold........... 1,000,000 cases
Sales price ................... $ 25.00 per case
Variable manufacturing costs........... 7.00 per case
Fixed manufacturing costs ............ 6,500,000 per year
Variable selling and administrative costs....... 2.00 per case
Fixed selling and administrative costs ........ 3,200,000 per year

The Walls Candy Company receives an offer to produce 5,000 cases of candy for a special event. This is a one- time opportunity during a period when the company has excess capacity. What is the minimum selling price The Walls Candy Company should accept for the order? Explain why.



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  • CreatedJanuary 16, 2015
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