Pamela in Bamplona Makes Bull-Repellent Scent According to a Traditional

Multiple Choice

Pamela in Bamplona makes bull-repellent scent according to a traditional Spanish recipe, which normally sells at €9 (Euros) per unit. Normal production volume is 10,000 ounces per month. Average cost is €5 per ounce, of which €2 is direct material and €1 is variable conversion cost. This product is seasonal. After July, demand for this product drops to 6,000 ounces monthly. In November, Umberto offers to buy 1,500 ounces for €6,000. If Pamela accepts the order, she must design a special label for Umberto at a cost of €500. Each label will cost 25 cents to make and apply. Pamela should:

A) accept the order, at a gain of €625
B) reject the order, at a loss of €1,875
C) reject the order, at a loss of €2,375
D) accept the order, at a gain of €1,125
E) none of the above