Answer the following questions using the information below:
Ferryman Products manufactures coffee tables. Ferryman Products has a policy of adding a 20% markup to full costs and currently has excess capacity. The following information pertains to the company's normal operations per month:

-Ferryman Products is approached by an overseas customer to fulfill a one-time-only special order for 1,000 units. All cost relationships remain the same except for a one-time setup charge of $20,000. No additional design, marketing, or distribution costs will be incurred. What is the minimum acceptable bid per unit on this one-time-only special order?
A)$134.75
B)$154.76
C)$222.25
D)$161.70

Question

Answer the following questions using the information below:
Ferryman Products manufactures coffee tables. Ferryman Products has a policy of adding a 20% markup to full costs and currently has excess capacity. The following information pertains to the company's normal operations per month:
  
-Ferryman Products is approached by an overseas customer to fulfill a one-time-only special order for 1,000 units. All cost relationships remain the same except for a one-time setup charge of $20,000. No additional design, marketing, or distribution costs will be incurred. What is the minimum acceptable bid per unit on this one-time-only special order?
A)$134.75 
B)$154.76 
C)$222.25 
D)$161.70

Quizplus · Accepted Answer

The minimum acceptable bid per unit should cover the variable costs and the one-time setup charge. Assuming the variable cost per unit is $114.75 (from the context), the setup charge of $20,000 spread over 1,000 units adds $20 per unit. Therefore, the minimum bid is $114.75 + $20 = $134.75.

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