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Special Order William A. Smith Pest Control, Inc. (WASP) currently provides pest control services...

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Accounting

Special Order

William A. Smith Pest Control, Inc. (WASP) currently provides pest control services to households in the local community. WASP has an opportunity to service 250 customers of another pest control firm that has also been selling in the community. WASP has the capacity to service 1,000 homes. WASP has an effective income tax rate of 30%. WASPs income statement, before consideration of the new opportunity, is as follows.

Sales (750 homes at $260 per home) $195,000
Variable service costs 136,500
Contribution margin 58,500
Fixed service costs 30,000
Operating income 28,500
Income taxes 8,550
Net income $19,950

In negotiating a price for the special opportunity, at what amount should WASP set the minimum per-home price?

$Answer minimum per-home price

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