85.Pricing special ordersExplain why an American corporation might sell a product in Eastern Europe at a price significantly below that for which it sells the same product in the United States. ...

85.Pricing special orders


Explain why an American corporation might sell a product in Eastern Europe at a price significantly below that for which it sells the same product in the United States.

86.Links, Inc. produces golf gloves. The gloves sell for $16 each. Variable costs are $8.50 and fixed costs are $1.50 each. An Australian company has offered to pay $12 each for 2,000 gloves. The manufacturing capacity will not be affected by this special order and it will not affect regular sales. Fixed assets will not change but variable selling costs will increase by $1.75 a glove due to delivery costs.


(a) What is the relevant cost per unit on this special order?
(b) How will company profits be affected?
(c) Should the company accept this special order?