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Question - a) Viking Corporation's variable cost per unit produced is $100. Wholesaler Y offers to buy 2,000 additional units at $120 each. Wholesaler Z proposes to buy 1,500 additional units at $140 per unit. Viking has enough excess capacity to produce one but not both of the orders. Fixed costs are not affected by accepting either offer.
Required: Which offer should Viking accept and why?
b) Colin O'Shea has a carpentry shop that employs 4 carpenters. Colin received an order for 1,000 coffee tables. The coffee tables have a round tabletop and four decorative legs. An offer for $500 per table was received. Colin found an unfinished round tabletop that he could buy for $50 each.
The quantitative cost data to make the tabletop is shown below:
Direct materials $10
Direct labor 35
Variable overhead 10
Fixed overhead 7
Required: What qualitative factors would Colin consider before he decides to buy the tabletop or make it? (Hint: No calculations required]
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