You Are the General Manager of TU Modems Inc The Market Is Saturated with Modems,and Your Sales Department Has

Essay

You are the general manager of TU Modems Inc.,and your accounting department has provided you with the following information about the total cost of producing three potential quantities of a commercial-grade modem:
$$\begin{array} { | l | c | c | r | } \hline & 100,000 \text { Units } & 150,000 U r i t s & 200,000 \text { Urits } \\\hline \text { Materials } & \$ 250,000 & \$ 375,000 & \$ 500,000 \\\hline \text { Depreciation } & 900,000 & 900,000 & 900,000 \\\hline \text { Labor } & 10,000 & 15,000 & 20,000 \\\hline \text { Total costs } & \$ 1,160,000 & \$ 1,290,000 & \$ 1,420,000 \\\hline\end{array}$$ The market is saturated with modems,and your sales department has been able to identify only one potential buyer of your modems.This customer has numerous options and as a result is only willing to pay $300 per modem for an order of 100,000 modems.You must decide whether to sign a contract under these terms or simply shut down your operations.What is your optimal decision?