Question :
36) Axle and Wheel Manufacturing approached by a European customer : 1837757
36) Axle and Wheel Manufacturing is approached by a European customer to fill a one-time-only special order for a product similar to one offered to domestic customers. The following per unit data apply for sales to regular customers:
Direct materials$33
Direct labour15
Variable manufacturing support24
Fixed manufacturing support52
Total manufacturing costs$124
Markup (50%)62
Targeted selling price$186
Axle and Wheel Manufacturing has excess capacity.
Required:
a.What is the full cost of the product per unit?
b.What is the contribution margin per unit?
c.Which costs are relevant for making the decision regarding this one-time-only special order? Why?
d.For Axle and Wheel Manufacturing, what is the minimum acceptable price of this one-time-only special order?
e.For this one-time-only special order, should Axle and Wheel Manufacturing consider a price of $100 per unit? Why or why not?
37) Parker and Spitzer Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. The following per unit data apply for sales to regular customers:
Direct materials$66
Direct labour30
Variable manufacturing support48
Fixed manufacturing support104
Total manufacturing costs248
Markup (50%)124
Targeted selling price$372
Parker and Spitzer Manufacturing has excess capacity.
Required:
a.What is the full cost of the product per unit?
b.What is the contribution margin per unit?
c.Which costs are relevant for making the decision regarding this one-time-only special order? Why?
d.For Parker and Spitzer Manufacturing, what is the minimum acceptable price of this one-time-only special order?
e.For this one-time-only special order, should Parker and Spitzer Manufacturing consider a price of 200 per unit? Why or why not?
38) Silver Lake Cabinets is approached by Ms. Jenny Zhang, 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 labour125
Variable manufacturing support60
Fixed manufacturing support75
Total manufacturing costs$360
Markup (60%)216
Targeted selling price$576
Silver Lake Cabinets has excess capacity. Ms. Zhang wants the cabinets in cherry rather than oak, so direct material costs will increase by $30 per unit.
Required:
a.For Silver Lake Cabinets, what is the minimum acceptable price of this one-time-only special order?
b.Other than price, what other items should Silver Lake Cabinets consider before accepting this one-time-only special order?
c.How would the analysis differ if there was limited capacity?
