Gladys Vado makes wax figurines for various holidays to be sold in gift shops. H

Question

Gladys Vado makes wax figurines for various holidays to be sold in gift shops. Her selling price is $2.25 each. Her costs are as follows. Gladys pays her salespeople a 10% commission on all sales. Other period expenses are all fixed in total at $20,000 per year. A large department store has asked Gladys to bid on providing 2.000 figurines during the Christmas season. She has sufficient unused capacity to fill the order. Vado's company has already done sufficient business to be profitable for the year prior to the bid request.

Explanation / Answer

Answer:(1) Contribution cost per unit=2.25*(2.25*10%)-0.75=1.275

Yes gladys should accept the order because $1.25 is greater than variable cost per unit.

Answer:(2) Lowest bid price=0.225+0.75=0.975

Atleast should cover its variable cost.

Answer:(3) Price=0.75+0.225+0.25+(1500/2000)

=1.975

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