- Submitted By: fatehjit-singh
- Date Submitted: 03/20/2015 5:40 PM
- Category: Business
- Words: 598
- Page: 3

If Natalia accept this offer, she will not lose money but she will gain less profit then other sales of 70000 bags. Natalia will get the profit of only $3 instead of $5 for her routine sales. They were producing on their 70% capacity. Their total capacity is of 100000 bags so she can produce 30000 more bags from her existing production setup. Here in this variable production cost she has $3 for direct labour and $2 for direct material cost so her variable total cost is $5 and the fixed cost is $5 so it makes sense that Natalia’s production cost is $10 for the first bag and then after her production cost would become $5. Now if Natalia accept this offer with Brazilian company of 20000 bags then she has to sale a bag on $8. So she can earn $3 from each bag because her production cost is total of $5. After all she will not lose but make lesser money than usual.

In class qAssignment-3, Contemporary Business Management, Prof Albert Knab, Fanshawe College

IC3 Questions:

Q-1: Will Natalia lose the money if she accepts Brazilian offer? Explain.

Ans-1: If Natalia accept this offer, she will not lose money but she will gain less profit then other sales of 70000 bags. Natalia will get the profit of only $3 instead of $5 for her routine sales. They were producing on their 70% capacity. Their total capacity is of 100000 bags so she can produce 30000 more bags from her existing production setup. Here in this variable production cost she has $3 for direct labour and $2 for direct material cost so her variable total cost is $5 and the fixed cost is $5 so it makes sense that Natalia’s production cost is $10 for the first bag and then after her production cost would become $5. Now if Natalia accept this offer with Brazilian company of 20000 bags then she has to sale a bag on $8. So she can earn $3 from each bag because her production cost is total of $5. After all she will not lose but make lesser money than usual.

Q-2: What factors other than costs and revenue should be...