A customer from outside of prescotts normal sales area has

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The Prescott Company produces a light-weight wind breaker with the following per unit costs:

Direct Materials             $4.00

Direct Labor                   1.00

Variable Overhead         1.75

Fixed Overhead              2.00

Total Unit Cost               $8.75

While production capacity for the next year is 200,000 units, Prescott expects to produce only 170,000.

The fixed selling costs total $85,000 per year and variable selling costs are $.5 for each unit sold.

The wind breakers usually sell for $12 each.

A customer from outside of Prescott's normal sales area has offered to buy 20,000 wind breakers for $8 each. Further, the customer would pay all transportation costs and there would be not variable selling costs incurred.

Reference no: EM13568321

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