A large retail customer made an offer to buy 10,000 units at a special price...

IIA IIA-CIA-Part3 Question Answer

A large retail customer made an offer to buy 10,000 units at a special price of $7 per unit. The manufacturer usually sells each unit for $10. Variable manufacturing costs are $5 per unit and fixed manufacturing costs are $3 per unit. For the manufacturer to accept the offer, which of the following assumptions needs to be true?

Fixed and variable manufacturing costs are less than the special offer selling price

The manufacturer can fulfill the order without expanding the capacities of the production facilities

Costs related to accepting this offer can be absorbed through the sale of other products

The manufacturer’s production facilities are currently operating at full capacity

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A large retail customer made an offer to buy 10,000 units at a special price...

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