SOLUTION BY CHARTERED ACCOUNTANT

SOLUTION BY CHARTERED ACCOUNTANT

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
labor                                 125

Variable
manufacturing support 60

Fixed
manufacturing support    75

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?

 

You can place an order similar to this with us. You are assured of an authentic custom paper delivered within the given deadline besides our 24/7 customer support all through.

 

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