The following data refer to Clear Panes, a division of Global Corporation. Clear Panes makes and sells residential windows that sell for $150 each. Clear Panes expects sales of 150,000 units in 2017. Clear Panes’ annual fixed costs are $2,750,000 and their variable cost is $90 per window. Global evaluates Clear Panes based on residual income. The total investment attributed to Clear Panes is $12 million and the required rate of return on investment is 16%. Ignore taxes and depreciation expense. Answer each of the following parts independently, unless otherwise stated. Q. One of Clear Panes’s regular customers asks for a special window with stained glass inserts. The customer requires 2,500 of these windows. Clear Panes estimates its variable cost for these special units at $105 each. Clear Panes will also have to undertake new investment of $300,000 to produce these windows. What is the minimum selling price that will make the deal acceptable to Clear Panes?
The following data refer to Clear Panes, a division of Global Corporation. Clear Panes makes and sells residential windows that sell for $150 each. Clear Panes expects sales of 150,000 units in 2017. Clear Panes’ annual fixed costs are $2,750,000 and their variable cost is $90 per window. Global evaluates Clear Panes based on residual income. The total investment attributed to Clear Panes is $12 million and the required rate of
Q. One of Clear Panes’s regular customers asks for a special window with stained glass inserts. The customer requires 2,500 of these windows. Clear Panes estimates its variable cost for these special units at $105 each. Clear Panes will also have to undertake new investment of $300,000 to produce these windows. What is the minimum selling price that will make the deal acceptable to Clear Panes?
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