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Company A produce cabinet. The company is approached by new customer to fulfill large one time only special order for a product similar to one

Company A produce cabinet. The company is approached by new customer to fulfill 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%)

215

Targeted selling price

$576

Company A has excess capacity. The new customer wants the cabinets in cherry rather than oak, so direct material costs will increase by $30 per unit.

  • a. For Company A, what is the minimum acceptable price of this one-time-only special order?

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

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

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