Question
c/ Soft Lily Cabinets is approached by Mr. Kenny Shang, a new customer, to fulfill a large one-time-only special order for a product similar to
c/ Soft Lily Cabinets is approached by Mr. Kenny Shang, 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 Soft Lily Cabinets has excess capacity. Mr. Shang wants the cabinets in cherry rather than oak, so direct material costs will increase by $15 per unit. Required: (5 marks) i. For Soft Lily Cabinets, what is the minimum acceptable price of this one-time-only special order? ii. Other than price, what other items should Soft Lily Cabinets consider before accepting this one-time-only special order? iii. How would the analysis differ if there was limited capacity
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