Normal price of mini-scooters are $120 per scooters, ABC estimates 400,000 scooters to be sold for Year 2013.
Material costs are $20,0000 per year to produce these scooters.
Variable costs are $10.00/per mile delivery and $50.00/scooter for handling charges.
ABC is approached by Pleasure travel to purchase 5000 scooters but they want a special price of $100/per mini-scooter instead of $100, and this would require 5000 delivery miles and 750 separate handing fees as storage and warehousing is required during shipment. what would the profit or loss be from this discount order if ABC accepts the order?
To calculate the profit or loss from the discount order, we need to calculate the revenue and the total costs involved.
First, let's calculate the revenue:
Number of scooters sold = 5,000 (as Pleasure travel wants to purchase 5,000 scooters)
Price per scooter = $100 (as Pleasure travel wants a special price of $100)
Revenue from the discount order = Number of scooters sold * Price per scooter = 5,000 * $100 = $500,000
Next, let's calculate the total costs:
Material costs per year = $200,000 (given)
Variable costs per scooter for handling charges = $50.00 (as mentioned)
Number of handling fees = 750 (as mentioned)
Total handling charges = Number of handling fees * Variable costs per scooter for handling charges = 750 * $50.00 = $37,500
Total costs = Material costs per year + Total handling charges
Total costs = $200,000 + $37,500 = $237,500
Now, we can calculate the profit or loss:
Profit or loss = Revenue - Total costs
Profit or loss = $500,000 - $237,500 = $262,500
Therefore, if ABC accepts the discount order from Pleasure travel, they would have a profit of $262,500.