Question
Katy Co. is approached by a new customer to fulfill a large one-time-only special order for a product similar to one offered to domestic customers.
Katy Co. is approached by a new customer to fulfill a large one-time-only special order for a product similar to one offered to domestic customers. Katy Co. has excess capacity. The following per unit data apply for sales to regular customers: Direct materials $140 Direct labor $70 Variable manufacturing support $80 Fixed manufacturing support $60 Total manufacturing costs $350 Markup 30% $105 Targeted selling price $455 Required: What is the full cost of the product per unit if the marketing costs are $40? What is the contribution margin per unit? For Katy Co., what is the minimum acceptable price of this one-time-only special order? For this one-time-only special order, should Katy Co. consider a price of $300 per unit? Why or why not? Explain.
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