.(10 polnts) Welch Manufacturing is approached by a European customer to fulflla
ID: 2510491 • Letter: #
Question
.(10 polnts) Welch Manufacturing is approached by a European customer to fulflla one-time-only special order for a producet similar to one offered to domestic customers. Welch Manufacturing has excess capacity. The following per unit data apply for sales to regular customers: Variable costs: Direct materials Direct labor Manufacturing support $40 20 45 15 Marketing costs Fixed costs: 60 180 Manufacturing and Marketing Total costs For Welch Manufacturing, what is the minimum acceptable price of this special order? (5 points). What is the change in operating profits if the one-time-only special order for 1,000 units is accepted for $200 a unit by Welch? (5 points). B. (10 Points) After conducting a market research study, Schultz Manufacturing decided to produce a new interior door to complement its exterior door line. It is estimated that the new interior door can be sold at a annual target sales volume for interior doors is 20,000. Schultz has target operating income of 25% of sales. target price of $60. The What is the target costr? (5 points). What is the target operating income? (5 points)Explanation / Answer
A Since, Welch will have to incur fixed manufacturing & marketing cost irrespective of the fact whether it accepts one time order or not. Therefore, the minumun acceptable price for Welch is the total of the variable cost. Since, Welch is producing goods for other customer, it will not incur variable marketing cost in this special order
If the special order is accepted at a proce of $ 200 per unit for 1000 units, then the change in operating profit will be (200-105)*1000
Change in Operating Profit=95,000
Minimum Acceptable price of special order Direct Material 40 Direct Labour 20 Manufaturing Support 45 Minimum Acceptable price of special order 105Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.