Questions based on the below scenario:

1. What do you think is a reasonable price for John to charge his sister and brother-in-law

2. What is the lowest possible cost that you think can be justified and why this is the true cost?

3. What is the highest possible cost that you think can be justified and why this is the true cost?

John Dorilane IV is president and CEO of Dorilane Furniture Co. of Milltown Pa. Dorilane Furniture Co. produces a very successful patio furniture set that retails for $1,200. All the sets produced are sold and they are typically backordered for a month. At the family New Year gathering, feeling in a particularly charitable mood, John promised his sister Dora and her husband Fred a set of Patio furniture at cost. On January 10, John received a letter from Fred and Dora requesting a furniture set. John was shocked to find that his sister had purloined confidential cost accounting information from the firm and used it to ask for a set of furniture at a ridiculously low price. The cost accounting information appropriated by Dora is given below:

Cost Item	Annual Costs (2,000 units)
Factory labor, Direct	$118,000.00
Direct Materials	$ 82,000.00
Advertising	$ 50,000.00
Factory Supervision	$ 40,000.00
Property Tax, Factory building	$ 3,500.00
Sales Commissions	$ 80,000.00
Insurance, Factory	$ 2,500.00
Depreciation, Office Equipment	$ 4,000.00
Lease Cost, factory equipment	$ 12,000.00
Indirect Materials, Factory	$ 6,000.00
Depreciation, Factory building	$ 10,000.00
General Office supplies	$ 3,000.00
General office salaries	$ 60,000.00