Rippey Corporation Manufactures a Single Product with the Following Unit

question 97

Essay

Rippey Corporation manufactures a single product with the following unit costs for 5,000 units:
$\begin{array}{lr}\text { Direct materials } & \$ 60 \\\text { Direct labour } & 30 \\\text { Factory overhead (40\% variable) } & 90 \\\text { Selling expenses ( } 60 \% \text { variable) } & 30 \\\text { Administrative expenses ( } 20 \% \text { variable) } & \$ \underline{15}\\\text { Total per unit }&\underline{225} \end{array}$ Recently,a company approached Rippey Corporation about buying 1,000 units for $225.Currently,the models are sold to dealers for $412.50.Rippey's capacity is sufficient to produce the extra 1,000 units.No additional selling expenses would be incurred on the special order.
a.What is the profit earned by Rippey Corporation on the original 5,000 units?
b.Should Rippey accept the special order if its goal is to maximize short-run profits? How much will income be affected?
c.Determine the minimum price Rippey would want to receive in order to increase profits by $7,500 on the special order.
d.When making a special order decision,what qualitative aspects of the decision should Rippey Corporation consider?

Recognize the impact of consumer protection law on online transactions.

Understand the basic concept of asymmetric information and its impact on market transactions.

Recognize adverse selection and moral hazard problems in various markets.

Identify mechanisms like market signaling and government intervention to mitigate asymmetric information issues.

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Definitions:

Oligopoly

A market structure characterized by a small number of large firms dominating the industry, often leading to limited competition.

Pure Monopoly

A market structure characterized by a single seller, selling a unique product in the market with no close substitutes, leading to significant control over prices.

Monopolistic Competition

A market structure characterized by many firms selling products that are similar but not identical, allowing for competition on factors other than just price.