Question - Company A produce cabinet. The company is approached by new customer to fulfill 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
Variable manufacturing support 60
Fixed manufacturing support 75
Total manufacturing costs 360
Markup (60%) 215
Targeted selling price $576
Company A has excess capacity. The new customer wants the cabinets in cherry rather than oak, so direct material costs will increase by $30 per unit.
a. For Company A, what is the minimum acceptable price of this one-time-only special order?
b. Other than price, what other items should the company consider before accepting this one-time-only special order?
c. How would the analysis differ if there was limited capacity?