CASE 2 BACKWOODS INC.

Backwoods Incorporated manufactures rustic furniture The cost accounting system estimates manufacturing costs to be $80 per table, consisting of 70% variable costs and 30% fixed costs. The company has surplus capacity available. It is Backwoods' policy to add a 50% markup to full costs for only long-term orders.

Backwoods Incorporated is invited to bid on an order to supply 100 rustic tables.

a.What is the lowest price Backwoods should bid on this one-time-only (short-term) special order?

b.A large hotel chain is currently expanding and has decided to decorate all new hotels using the rustic style. Backwoods Incorporated is invited to submit a bid to the hotel chain. What is the lowest price per unit Backwoods should bid on this long-term order? Include qualitative factors in your explanation of your decision-making for this case.