Determine the incremental costs to fit in a production runMicroeconomics
Your company, Bright Paints, is one of a dozen companies manufacturing a special reflective paint used for traffic signs. The State Department of Transportation has called for tenders to supply 10,000 gallons of blue reflective paint to be delivered within two months. You can foresee fitting in a production run of the blue paint and have decided to bid on the job. You calculate your incremental costs for this job to be $76,200. This particular contract is standard, similar in all in respects to hundreds of contracts you have bid on over the past few years. Your pricing policy has been to apply a mark-up to incremental costs to arrive at the bid price. Your mark-up has been higher when you had plenty of orders and lower when you had few or no orders to fulfill. You have assembled data relating the mark-up rate used in the percentage of contracts won at each mark-up rate, as follows.
mark-up rate(%) %of contracts won at that rate
0 95.9
10 84.8
15 65.4
20 41.3
25 15.3
30 3.0
35 0.2
