Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Sparky Family Manufacturing (SFM) has been making and selling backyard fire pits in Pacifica, CA for over 50 years. They have loyal customers, many who
Sparky Family Manufacturing (SFM) has been making and selling backyard fire pits in Pacifica, CA for over 50 years. They have loyal customers, many who travel almost 100 miles from the Pacifica location to purchase an SFM fire pit. Each fire pit regularly sells for $300. The following cost data per unit are based on a full capacity of 3,000 fire pits produced each year. Direct material $100 Direct labor $ 75 Manufacturing overhead (50% variable) $ 60 A new customer, The Ritz Carlton at Half Moon Bay, is negotiating with SFM for a special order. The Ritz Carlton is planning to purchase at least 100 of the SFM fire pits, but will only do so at a discounted price. The only selling cost that would be incurred on the special order would be a $15 sales commission per fire pit. Required: What is the minimum selling price SFM should negotiate with the Ritz Carlton for the proposed special order? Show calculations. Describe any qualitative factors, other than relevant costs, that SFM should consider before accepting this special order
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started