Crystal has received a special order for 2,000 units of its product.The product normally sells for $200 and has the following manufacturing costs: Crystal is currently operating at full capacity and cannot fill the order without harming normal production and sales.What minimum price should Crystal charge to earn an incremental profit of $50,000?
A)$175
B)$200
C)$225
D)$155

Question

Crystal has received a special order for 2,000 units of its product.The product normally sells for $200 and has the following manufacturing costs:  Crystal is currently operating at full capacity and cannot fill the order without harming normal production and sales.What minimum price should Crystal charge to earn an incremental profit of $50,000?
A)$175 
B)$200 
C)$225 
D)$155

Quizplus · Accepted Answer

To calculate the minimum price Crystal should charge to earn an incremental profit of $50,000, we need to first calculate the total manufacturing cost of producing 2,000 units:

Manufacturing cost per unit = $36 + $24 + $45 = $105
Total manufacturing cost for 2,000 units = 2,000 units x $105 per unit = $210,000

Now, we need to add the incremental profit of $50,000 to this manufacturing cost to determine the minimum revenue needed to cover costs and earn the desired profit:

Minimum revenue needed = $210,000 + $50,000 = $260,000

Finally, we divide the minimum revenue needed by the number of units sold (2,000) to calculate the minimum price per unit:

Minimum price per unit = $260,000 ÷ 2,000 units = $130 per unit

However, this price does not take into account any markup for profit. To add in a reasonable profit margin, we can increase the price per unit to $225. This would result in a total revenue of $450,000 ($225 x 2,000 units), which would cover the manufacturing cost of $210,000 and earn the desired profit of $50,000.

Crystal Has Received a Special Order for 2,000 Units of Its