1. 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 labor62.50

Variable manufacturing support30.00

Fixed manufacturing support37.50

Total manufacturing costs180.00

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?