Question

A company prints proceedings books for a trade show that are sold to attendees for $10 per book. The books cost the company $2 per book to make. Any books left over at the end of the trade show can be sold to a local paper mill for $0.50 each, but it costs the printing company $0.25 per book to haul them to the paper mill. What are the underage and overage costs for the books

Answer 1

Answer and Explanation:

Given that

Selling price = $10

Cost price = $2

Now

The Salvage Value (SV) = 0.50 - 0.25 = 0.25

So,

Underage penalty (Cu) = Selling price - Cost price

= $10 - $2

= $8

And,  

Overage penalty (Co) = Cost price - Salvage Value

= $2 - $0.25

= $1.75

Hence, the same is to be conisdered