The following data corresponds to the Retail Stores of the North of PR.

 Usual (normal) average selling price per unit: $9.00; 

Variable cost per unit: $6.00; 

Total annual non-avoidable fixed cost: $100,000.00; 

Normal annual sales: 50,000 units; 

Maximum annual sales level: 75,000 units.

 Suppose that four companies from another region offer retail stores in northern PR to buy 10,000 units and the price per unit offered is

Company 1: $5.95;

Company 2: $6.00;

Company 3: $7.99;

Company 4: $8.00.

Required

1. What should be the decision on these offers? Identify some non-financial factors that influence the firm's decision to reject or not the offer of Firms 1, 2, 3, and 4.

2. Find the relationship if it exists between the offers and the total non-avoidable fixed costs of the company and the non-avoidable fixed costs per unit of the company

Answer rating: 100% (QA)

1 To determine the decision on these offers the company needs to compare the offered prices with its own costs and consider various nonfinancial facto... View the full answer