Reference no: EM132744568
Question - PRICING DECISIONS AND CUSTOMER PROFITABILITY
THEORETICAL QUESTIONS TO CONSIDER:
Market-based approach vs cost-based approach
Influence of time horizon on price-setting
Customer profitability analysis
Question - Sunrise Ltd is approached by an agent for an overseas customer seeking to source a large one-time-only special order for a product similar to one offered to regular customers. Sunrise Ltd has excess capacity.
The following per unit data applies for sales to regular customers:
Direct materials $45.60
Direct manufacturing labour $25.90
Variable manufacturing overhead $50.00
Fixed manufacturing overhead $100.00
Required -
(a) What is the minimum acceptable price of this one-time-only special order?
(b) What price would be offered to long-term customers?