Numble Inc., manufactures boxed stationery. Currently, the company is operating at 80 percent of capacity. A chain of hospitals has offered to buy 24,000 boxes of Numble’s’ pink-bordered thank-you notes as long as the box can be customized with the hospital chain’s logo. While the normal selling price is $5 .00 per box, the chain has offered just $3.40 per box. Numble can accommodate the Special order Without affecting current sales. Unit cost information for a box of thank-you notes follows: Required
Numble Inc., manufactures boxed stationery. Currently, the company is operating at 80 percent of capacity. A chain of hospitals has offered to buy 24,000 boxes of Numble’s’ pink-bordered thank-you notes as long as the box can be customized with the hospital chain’s logo. While the normal selling price is $5 .00 per box, the chain has offered just $3.40 per box. Numble can accommodate the Special order Without affecting current sales. Unit cost information for a box of thank-you notes follows:
Required:
1. What are the alternatives for Numble Company?
2. Assume that none of the fixed cost is avoidable. List the relevant cost(s) of internal production and of external purchase.
3. Which alternative is more cost-effective and by how much?
4. Will Numble still accept the offer if the price offered is $2.50? Why or why not? Explain.
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