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What is the minimum acceptable price

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Reference no: EM13339235

Tamworth Cabinets is approached by Ms. Jenny Zhang, a new customer, to fulfil a large one-time-only special order for a product similar to one offered to regular customers. The following per unit data apply for sales to regular customers:

Direct materials

$100

Direct labor

125

Variable manufacturing support

60

Fixed manufacturing support 

75

Total manufacturing costs

360

Markup (60%) 

216

Targeted selling price

$576

Tamworth Cabinets has excess capacity. Ms. Zhang wants the cabinets in cherry rather than oak, so direct material costs will increase by $30 per unit.

 Required:

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

b. Other than price, what other items should Tamworth Cabinets consider before accepting this one-time-only special order?

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

Reference no: EM13339235

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