Reference no: EM131820516

Question - On November 25, 2012 Marquez Golf Co. received a special order for 5,000 three-wood golf club sets. These golf clubs will be marketed in Japan. Ito Imports, Inc. the purchasing company wants the clubs bulk packaged and is willing to pay $55 per set for the clubs. The president has gathered the following product costing information about the set of woods being discussed; direct materials (wood) $600 per 100 sets; direct materials (metal shafts) $1,000 per 100 sets; and direct materials (grips) $150 per 100 sets. Direct labor is $20 per set. Variable manufacturing costs are $12 per set, and fixed manufacturing costs are 20 percent of direct labor dollars. Variable selling expense are $10 per set. Variable manufacturing costs are $12 per set, and fixed manufacturing costs are 20 percent of direct labor dollars. Variable selling expense are $10 per set, and variable shipping costs are $7 per set. Fixed general and administrative costs are figured at 30 percent of direct labor dollars. Bulk shipping costs will total $11,000, thus eliminating both variable selling and variable shipping costs from consideration. The company did not expect this order and will reach planned production capacity for the year. However, there is enough plant capacity for the special order. Round answers to two decimal places.

A. Prepare an analysis for the president to use in deciding whether to accept or reject the offer by Ito Imports, Inc. What decision should be made?

B. What is the lowest possible price Marques golf co. could charge per set of woods and still make a $9,000 profit on this order?