Explain general medical makes disposable syringes

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Reference no: EM1358802

General Medical makes disposable syringes for hospitals and doctor supply companies. The company uses cost plus pricing and currently charges 150% of average variable costs. General Medical learned of an opportunity to sell 300,000 syringes to the Department of Defense if they can be delivered within three months at a price not in excess of $1 each. General Medical normally sells its syringes for $1.20 each. If General Medical accepts the Defense Department order, it will have to forgo sales of 100000 syringes to it regular customers over this time period, although this loss of sales is expected to affect future sales.

If sales for balance of the year are expected to be 50000 units less because of some lost customers who do not return, should the order be accepted? (Ignore any effects beyond one year.)

Reference no: EM1358802

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