Peters Company Produces a Product with the Following Unit Cost

question 73

Multiple Choice

Peters Company produces a product with the following unit cost.
Fixed selling costs are $600,000 per year and variable selling costs are $1.50 per unit sold.
Production capacity is 500,000 units per year. However, the company expects to produce only 300,000 units next year. The product normally sells for $15 each. A customer has offered to buy 150,000 units for $10 each. The units would be sold in an area outside the market area currently served.
-The incremental cost per unit associated with the special order is

• A) $8.00.
• B) $9.25.
• C) $9.50.
• D) $10.00.

---

Definitions:

Psychographics

The study and classification of people according to their attitudes, aspirations, and other psychological criteria, especially in market research.

Demographics

The statistical characteristics of human populations, such as age, gender, income, and education, used especially to identify markets.

Buyer Persona

A semi-fictional representation of the ideal customer based on market research and real data about existing customers, helping businesses to understand and cater to their target audience.

Tornado

A violently rotating column of air that is in contact with both the surface of the Earth and a cumulonimbus cloud or, in rare cases, the base of a cumulus cloud.