Manawatu Furniture Ltd is approached by Ms Jenny Zhang,a new customer,to fulfil a large one-time-only special order for cabinets similar to one offered to regular customers.The following per unit data apply for sales to regular customers:
$$\begin{array} { l r }
\text { Direct materials } & \$ 150 \
\text { Direct labour } & 125 \
\text { Variable manufacturing support } & 80 \
\text { Fixed manufacturing support } & \underline{75 }\
\quad \text { Total manufacturing costs } & 430 \
\text { Mark-up (60\%) } & 258 \
\text { Targeted selling price } & \underline{ \$ 688 }\
\end{array}$$
Manawatu Furniture Ltd has excess capacity.Ms Zhang wants the cabinets in cherry rather than oak,so direct material costs will increase by $50 per unit.
Required:
a.For Manawatu Furniture Ltd,what is the minimum acceptable price of this one-time-only special order?
b.Other than price,what other items should Manawatu Furniture Ltd consider before accepting this one-time-only special order?
c.How would the analysis differ if there was limited capacity?
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Question

Manawatu Furniture Ltd is approached by Ms Jenny Zhang,a new customer,to fulfil a large one-time-only special order for cabinets similar to one offered to regular customers.The following per unit data apply for sales to regular customers:
 $$\begin{array} { l r } 
\text { Direct materials } & \$ 150 \
\text { Direct labour } & 125 \
\text { Variable manufacturing support } & 80 \
\text { Fixed manufacturing support } &  \underline{75 }\
\quad \text { Total manufacturing costs } & 430 \
\text { Mark-up (60\%) } & 258 \
\text { Targeted selling price } & \underline{ \$ 688 }\
\end{array}$$ 
Manawatu Furniture Ltd has excess capacity.Ms Zhang wants the cabinets in cherry rather than oak,so direct material costs will increase by $50 per unit.
Required:
a.For Manawatu Furniture Ltd,what is the minimum acceptable price of this one-time-only special order?
b.Other than price,what other items should Manawatu Furniture Ltd consider before accepting this one-time-only special order?
c.How would the analysis differ if there was limited capacity?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Quizplus · Accepted Answer

The Answer of Manawatu Furniture Ltd is approached by Ms Jenny Zhang,a new customer,to fulfil a large one-time-only special order for cabinets similar to one offered to regular customers.The following per unit data apply for sales to regular customers:
 $$\begin{array} { l r } 
\text { Direct materials } & \$ 150 \
\text { Direct labour } & 125 \
\text { Variable manufacturing support } & 80 \
\text { Fixed manufacturing support } &  \underline{75 }\
\quad \text { Total manufacturing costs } & 430 \
\text { Mark-up (60\%) } & 258 \
\text { Targeted selling price } & \underline{ \$ 688 }\
\end{array}$$ 
Manawatu Furniture Ltd has excess capacity.Ms Zhang wants the cabinets in cherry rather than oak,so direct material costs will increase by $50 per unit.
Required:
a.For Manawatu Furniture Ltd,what is the minimum acceptable price of this one-time-only special order?
b.Other than price,what other items should Manawatu Furniture Ltd consider before accepting this one-time-only special order?
c.How would the analysis differ if there was limited capacity?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Manawatu Furniture Ltd Is Approached by Ms Jenny Zhang,a New