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. Now assume that the order is received in July, peak season. If Pamela accepts the order, she will turn away regular customers who order 500 ounces. Pamela should:

A) reject the order, which loses €1,875
B) reject the order as it is less than her cost
C) accept the order if Umberto raises the price higher than €6.58/ounce
D) accept the order if Umberto raises the price higher than €5.58/ounce
E) none of the above