Question
Welch Manufacturing is approached by a European customer to fulfil a one-time-special order for a product similar to one offered to domestic customers. Welch manufacturing
Welch Manufacturing is approached by a European customer to fulfil a one-time-special order for a product similar to one offered to domestic customers. Welch manufacturing has a policy of adding a 10% markup to full costs and currently has the excess capacity. The following per unit data apply for sales to regular customers.
Variable costs
Direct material 30
Direct labour 10
Manufacturing overhead 15
marketing costs 5
Fixed Costs
Manufacturing overhead 100
Marketing costs 20
Total costs 180
Markup (10%) 18
estimated selling price 198
a) For welch, what is the minimum acceptable price of this one time special order?
b) if the european customer wanted a long term commitment for supplying this product, what price would most likely be quoted?
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