Moon Valley Cabinets is approached by Ms. Luanne Birch, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. The following per unit data apply for sales to regular customers:
Direct materials $100
Direct labor 125 CLICK HERE FOR SOLUTION
Variable manufacturing support 60
Fixed manufacturing support 75
Total manufacturing costs 360
Markup (60%) 216
Targeted selling price $576
Moon Valley Cabinets has excess capacity. Ms. Birch wants the cabinets in cherry rather than oak, so direct material costs will increase by $30 per unit.
Questions:
For Moon Valley Cabinets, what is the minimum acceptable price of this one-time-only special order? (7 points)
Other than price, what other items should Moon Valley Cabinets consider before accepting this one-time-only special order? (4 points)
How would the analysis differ if there was limited capacity? (4 points)
CLICK HERE FOR THE SOLUTIONDirect materials $100
Direct labor 125 CLICK HERE FOR SOLUTION
Variable manufacturing support 60
Fixed manufacturing support 75
Total manufacturing costs 360
Markup (60%) 216
Targeted selling price $576
Moon Valley Cabinets has excess capacity. Ms. Birch wants the cabinets in cherry rather than oak, so direct material costs will increase by $30 per unit.
Questions:
For Moon Valley Cabinets, what is the minimum acceptable price of this one-time-only special order? (7 points)
Other than price, what other items should Moon Valley Cabinets consider before accepting this one-time-only special order? (4 points)
How would the analysis differ if there was limited capacity? (4 points)
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