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William A. Smith Pest Control, Inc. (WASP) currently provides pest control services to households in the local community. WASP has an opportunity to service 250 customers of another pest control firm that has also been selling in the community. WASP has the capacity to service 1,000 homes. WASP has an effective income tax rate of 30%. WASP's income statement, before consideration of the new opportunity, is as follows.
Sales (750 homes at $260 per home)
$195,000
Variable service costs
136,500
Contribution margin
58,500
Fixed service costs
30,000
Operating income
28,500
Income taxes
8,550
Net income
$19,950
In negotiating a price for the special opportunity, at what amount should WASP set the minimum per-home price?
$Answer minimum per-home price
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