Question

Diamond Boot Factory normally sells its specialty boots for $28 a pair. An offer to buy 60 boots for $20 per pair was made by an organization hosting a national event in Norfolk. The variable cost per boot is $10, and special stitching will add another $3 per pair to the cost.

Determine the differential income or loss per pair of boots from selling to the organization.
$

Should Diamond Boot Factory accept or reject the special offer?

Answer 1

If selling to organisation than there will be loss of $3 per pair as Diamond boot factory normally sells specialty boots for $28 per pair and the variable cost per pair is $20($10 per boot ie$10X2=$20) and special stich cost $3 extra

So cost of boot $20+$3= $23 per pair

offer to buy by organisation is 60 boots ie 30 pairs

= 30 X $3 = $90 loss if diamond boot factory accepts the offer

Normally the boot factory gain $5 per pair of boots by selling it at $28 ie ($20+$3+$5=$28)

Diamond boot factory should reject the offer on the spot as it will cost them loss of $90 for full order

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