Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Wood-Lover Furniture Manufacturing is approached by Mr. Albert Cheung, a new customer, to fulfill a large one-time-only special order for a cabinet similar to one
Wood-Lover Furniture Manufacturing is approached by Mr. Albert Cheung, a new customer, to fulfill a large one-time-only special order for a cabinet similar to one offered to regular customers. The following per unit data apply for sales to regular customers: Direct material cost Direct labor cost Variable manufacturing overhead cost Fixed manufacturing overhead cost Total product cost Markup (60%) Targeted selling price $546 360 54 120 1,080 648 $1,728 Wood-Lover Furniture Manufacturing has excess capacity. Mr. Cheung wants the cabinets in cherry rather than oak, so direct material costs will increase to $600 per unit. The average marketing cost of Wood-Lover Furniture Manufacturing is $180 per unit. Required a) For Wood-Lover Furniture Manufacturing, what is the per unit relevant cost of the one-time-only special order? (3 marks) b) If Mr. Cheung offered to purchase the specialized cabinet at $1,500 per unit, should Wood-Lover Furniture Manufacturing accept this special order? Why? (3 marks) c) Discuss two factors Wood-Lover Furniture Manufacturing should consider before accepting this special order. (6 marks)
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