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Aussie Skateboards Ltd provides the data below relating to its single product for 2021:
Selling price per skateboard $180Annual fixed manufacturing costs $620,400Annual fixed non-manufacturing costs $260,000Variable manufacturing costs per skateboard $100Variable selling costs per skateboard $18Annual sales volume expected in 2021: 18,000 skateboards
Problem a) From the data provided by Aussie Skateboards Ltd for 2021, if the company decreases the price to $170 it is estimated the annual sales volume would increase to 20,000 skateboards per year. Should the company reduce the price? Why? (show all your calculations to justify your answer)
Problem b) The production capacity of Aussie Skateboards Ltd is 24,000 skateboards per year. The company received an offer from Sport Supplies Ltd to purchase from Aussie Skateboards an additional 5,000 skateboards in 2021 at $110 per skateboard. Aussie Skateboards would not incur any selling costs for this order but it would have to hire a supervisor only for this special order at a cost of $30,000. Should Aussie Skateboards accept this order? Why? (show all your calculations to justify your answer)
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