Question: special order hellogs ltd manufactures a breakfast cereal which is...
(Special order) Hellogs Ltd manufactures a breakfast cereal which is sold for 60p per packet. At present the company is using only 80% of their normal capacity. Normal capacityis250,000packetspermonth. Teskways,aleadingsupermarketchain,has approached Hellogs with an offer that would make use of the spare capacity. Teskways want to buy 50,000 packets per month at a price of 38p per packet, which they will sell as an ‘own label’ product.
The total costs per month are currently £78,000 of which £20,000 can be regarded as fixed.
Should Hellogs accept Teskways’ offer?