Crandle manufactures is approached by a potential customer to fulfull a one time
ID: 2543175 • Letter: C
Question
Crandle manufactures is approached by a potential customer to fulfull a one time only special order for a product similar to one offered to demoestic customers. The company has excess capacity. The following per unit data apply for sales to regular customers.
Varaible Costs:
Direct Materials 140
Direct labor 100
Manufacturing support 105
Marketing costs 55
Fixed Costs:
Manufacturing support 175
Marketing costs 65
Total costs 640
Markup(50%) 320
Targeted selling price 960
For Crandle, what is the minimum acceptable price of this special order?
A 320.. B 400... C 640... D 480
Explanation / Answer
Answer:-For Crandle, the minimum acceptable price of this special order is $400 (Option D).
Explanation:- Minimum acceptable price of this special order= Only variable costs
Variable costs=Direct materials + Direct Labor+ Manufacturing support+ Marketing costs
=$140+$100+$105+$55 = $400
Crandle manufactures having a spare capacity to accept the special order hence only variable costs will be relevant costs. Fixed costs will continue to occur whether special order accepts or not.
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