Mambo Manufacturing Company Has a Normal Production Capacity of 40,000

Essay

Mambo Manufacturing Company has a normal production capacity of 40,000 units per month. Because of an excess amount of inventory on hand, it expects to produce only 30,000 units in July. Monthly fixed costs and expenses are $120,000 ($3 per unit at normal plant capacity) and variable costs and expenses are $8.75 per unit. The present selling price is $14.75 per unit. The company has an opportunity to sell 8,500 additional units at $9.50 per unit to a company who plans to market the product under its own brand name in a foreign market. The additional business will not affect the regular selling price or quantity of sales of Mambo Manufacturing Company.Prepare a differential analysis for the proposal to sell at the special price.