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What is the minimum acceptable price

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Question - Fiji Ltd is approached by Craig, 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:

Direct materials $150 Direct labour 125 Variable manufacturing support 80 Fixed manufacturing support 75 Total manufacturing costs 430 Mark-up (60%) 258 Targeted selling price $688

Fiji Ltd has excess capacity. Craig wants the cabinets in cherry rather than oak, so direct material costs will increase by $50 per unit.

Required -

a. For Fiji Ltd, what is the minimum acceptable price of this one-time-only special order?

b. Other than price, what other items should Fiji Ltd consider before accepting this onetime-only special order?

c. How would the analysis differ if there was limited capacity?

Reference no: EM132563439

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