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What is the minimum acceptable price

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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?

Reference no: EM132042823

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