Imagine you are buying gaskets. Your supplier calls you up with bad news: The workforce voted to
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Question:
- Imagine you are buying gaskets. Your supplier calls you up with bad news: The workforce voted to unionize. Labor costs are now going up by 25%! He asks you for a 25% increase in pricing. He tells you that because you are a "customer of choice," he doesn't want to pass along all of the costs to you. You look at your most recent cost breakdown for gaskets (shown below). What are you going to tell the supplier? What is the highest percentage price increase you are willing to accept?
| Supplier Cost Breakdown for Gaskets | |
| Labor | $4.00 |
| Material | $4.00 |
| Overhead | $6.00 |
| Tooling | $1.00 |
| Total Factory Cost | $15.00 |
| SG&A | $1.50 |
| Total Cost | $16.50 |
| Profit (Industry Standard 10%) | $1.65 |
| Price Paid | $18.15 |
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