Short-term decisions

I do not have Becker books. However, there is spare capacity of 4,000 units and the overseas customer wants 3,000. Fixed costs in total will remain unchanged, and therefore to ensure no reduction in profits they need to cover the variable costs. Therefore they should charge a minimum of €80 to cover the variable costs. (In the long term this could cause a problem because the customer might want more at that price in the long-term. However the question is only asking about short-term profit.) Do Becker not give answers to their questions?

Hello, I am able to give you the answer trom Becker. According to it, the correct one is B: 113 Explanation: the min.price is the relevant cost; Capacity is 54K per quater (18x3); Domestic sales are 50K per quater; so there is spare capacity of 4K; potentatial order can be satisfied without any loss, so there is no opportunity cost. The relevant cost is the incremental cost, which is the variable cost per unit. Moniq

Moniq: Thank you. cfelicepace: You are using a pirate copy of the revision kit. It is both illegal and unethical (and is wasting your own time because of not having the answers). You should buy a Revision Kit directly from the publishers - you can buy either hard or soft copies from them.

Sir, as mentioned above that the relevant cost in this question is the incremental cost, i.e, the variable cost/unit i.e, $80. Why is the books answer $113? Is it a printing mistake, because $80 is the variable cost and $33 is the Fixed O/H? Thanks

If the original question had been copied on here correctly, then the answer should be $80.

Hello all, thanks for your responses. This is indeed true - the correct answer is 80 $ . Variable cost of course, as stated above. I`ve raised it on Becker forum. And got confirmation that the answer should be A: 80$ (and not B - printing issue). Thanks again for paying attention to it:)

You are welcome :-)