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PLEASE SHOW ALL WORK South Beach Arts manufactures a reproduction art deco lamps for sale in the Art District. The company reports the following full

PLEASE SHOW ALL WORK

South Beach Arts manufactures a reproduction art deco lamps for sale in the Art District. The company reports the following full costs per unit at a volume of 2,000 units:

Direct materials

$ 800

Direct labor

345

Manufacturing overhead*

500

Selling expenses (50% variable)

300

Administrative expenses**

350

Total per unit

$2,295

* Manufacturing overhead is 70% fixed.

**Note that per unit administrative expenses include $500,000 fixed costs.

A company recently approached South Beach Arts management about buying 300 units of product. South Beach Arts currently sells its lamps to for $2,795 each. South Beach Arts has sufficient production capacity to produce the extra 300 units. No additional selling expenses would be incurred on the special order.

3.1. What is the minimum price South Beach Arts should charge just to break even on the special order if the company picks up the lamps at South Beach Arts factory?

Minimum price ___________________

3.2. South Beach Arts has an offer for the 300 units from a company in Brazil for $420,000. Packing & shipping to Brazil will cost $6,000.

Should South Beach Arts accept the offer? Yes No

3.3. What is the minimum South Beach Arts would accept? ___________

PLEASE SHOW ALL WORK

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