What is the minimum acceptable price

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Reference no: EM13813131 , Length: word count:1500

Loft 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                        $50.00

            Direct labor                                62.50

            Variable manufacturing support 30.00

            Fixed manufacturing support     37.50

                  Total manufacturing costs  180.00

            Markup (60%)                          108.00

            Targeted selling price             $288.00

Loft Lake Cabinets has excess capacity. Ms. Zhang wants the cabinets in cherry rather than oak, so direct material costs will increase by $15 per unit.

Required:

a. For Loft Lake Cabinets, what is the minimum acceptable price of this one-time-only special order?

b. Other than price, what other items should Loft Lake Cabinets consider before accepting this one-time-only special order?

c. How would the analysis differ if there was limited capacity?

Reference no: EM13813131

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