Gracius Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. Gracius Manufacturing has a policy of adding a 20% markup to full costs and currently has excess capacity. The following per unit data apply for sales to regular customers:

If the European customer wanted a long-term commitment, and not a one-time-only special order, for supplying this product, calculate the most likely price to be quoted assuming the markup remains the same?
A) $110
B) $250
C) $300
D) $190

Question

Gracius Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. Gracius Manufacturing has a policy of adding a 20% markup to full costs and currently has excess capacity. The following per unit data apply for sales to regular customers:

If the European customer wanted a long-term commitment, and not a one-time-only special order, for supplying this product, calculate the most likely price to be quoted assuming the markup remains the same?
A) $110 
B) $250 
C) $300 
D) $190

Quizplus · Accepted Answer

Long-run pricing is a strategic decision designed to build long-run relationships with customers based on stable and predictable prices. Therefore, the most likely long-term price = $300.

Gracius Manufacturing Is Approached by a European Customer to Fulfill