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Title: Silver Lake Cabinets is approached by Ms. Jenny Zhang, a new customer, to fulfill a large ... Post by: StormLrd on Nov 7, 2017 Silver Lake Cabinets is approached by Ms. Jenny Zhang, a new customer, to fulfill 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 labour 125 Variable manufacturing support 60 Fixed manufacturing support 75 Total manufacturing costs $360 Markup (60%) 216 Targeted selling price $576 Silver Lake 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 Silver Lake Cabinets, what is the minimum acceptable price of this one-time-only special order? b. Other than price, what other items should Silver Lake Cabinets consider before accepting this one-time-only special order? c. How would the analysis differ if there was limited capacity? Title: Re: Silver Lake Cabinets is approached by Ms. Jenny Zhang, a new customer, to fulfill a large ... Post by: Munihasen on Nov 7, 2017 a. $315 = Variable costs ($100 + $125 + $60) + $30 additional cost for cherry.
b. Silver Lake Cabinets should also consider the impact on current customers when these customers hear that another customer was offered a discounted price, and the impact on the competition and if they might choose to meet the discounted price. c. Currently, the incremental costs total $315. If additional capacity is needed to process this order, these incremental costs will increase by the cost of adding capacity. |