Reference no: EM132536183

LaCrosse Company expects the following results, without considering any of the changes described below.

                                       Product A                 Product B               Total

Sales                           $1,000                    $3,000             $4,000

Variable costs                 400                         1,000              1,400

Contribution margin          $ 600                       $2,000              $2,600

Fixed costs 

- avoidable                      (200)                         (300)                 (500)

- unavoidable                    (500)                      (1,000)               (1,500)

Profit (loss)                      $ (100)                       $ 700                   $ 600

The unavoidable costs are allocated based on unit sales of 1,000 A and 2,000 B. An exporter has offered $0.80 per unit for 200 units of A.

Question a. Find the change in income if LaCrosse accepts the order, assuming no loss of regular sales.

Question b. The managers believe that if they accept the special order, they will lose some sales at the regular price. Determine the number of units they could lose before the order became unprofitable.

Question c. The managers believe that they will lose 80 units at the regular price if they accept the order. Calculate the price they must charge for the special order to increase income by $50.