Special-Order Pricing Decision Great Falls Brewery\'s regular selling price for

Question

Special-Order Pricing Decision

Great Falls Brewery's regular selling price for a case of beer is $15. Variable costs are $8 per case, and fixed costs total $2 per case, based on production of 250,000 cases. The fixed costs remian unchanged within a relevant range of 50,000 to 30,000 cases. After sales of 180,000 cases were projected for the year, a special order was received for an additional 30,000 cases.

Calculate Great Falls Brewery's minimum acceptable selling price for the special order of 30,000 cases.

Explanation / Answer

If Freat falls Brewery takes the special order of 30000 cases then the total production would be (180000 + 300000) i.e 210000 cases which is under the production of 250000 cases and the Fixed costs would remain same for extra 30000 caes.

The minimum acceptable selling price for the special order of 30,000 cases should be $8 per case as it would cover the variable production cost.

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