Matikas Division of Shortcuts Company expects the following results for 2007: Unit sales 70,000 Unit selling price P 10 Unit variable cost P 4 Total fixed costs P300,000 Total investment P500,000 The minimum required ROI is 15 percent, and divisions are evaluated on residual income. A foreign customer has approached Matikas' manager with an offer to buy 10,000 units at P7 each. If Matikas accepts the order, it would not lose any of the 70,000 units at the regular price. Accepting the order would increase fixed costs by P10,000 and investment by P40,000. What is the minimum price that Matikas could accept for the order and still maintain its expected residual income?
Matikas Division of Shortcuts Company expects the following results for 2007:
Unit sales 70,000
Unit selling price P 10
Unit variable cost P 4
Total fixed costs P300,000
Total investment P500,000
The minimum required ROI is 15 percent, and divisions are evaluated on residual income. A foreign customer has approached Matikas' manager with an offer to buy 10,000 units at P7 each. If Matikas accepts the order, it would not lose any of the 70,000 units at the regular price. Accepting the order would increase fixed costs by P10,000 and investment by P40,000.
What is the minimum price that Matikas could accept for the order and still maintain its expected residual income?
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