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Parker and Spitzer Manufacturing is approached by a European customer to fulfill a one-time-only ...

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Parker and Spitzer Manufacturing is approached by a European customer to fulfill a one-time-only ...

Parker and Spitzer Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. The following per unit data apply for sales to regular customers:

   Direct materials   $66
   Direct labour   30
   Variable manufacturing support   48
   Fixed manufacturing support   104
   Total manufacturing costs   248
   Markup (50%)   124
   Targeted selling price   $372

Parker and Spitzer Manufacturing has excess capacity.

Required:
a.   What is the full cost of the product per unit?
b.   What is the contribution margin per unit?
c.   Which costs are relevant for making the decision regarding this one-time-only special order? Why?
d.   For Parker and Spitzer Manufacturing, what is the minimum acceptable price of this one-time-only special order?
e.   For this one-time-only special order, should Parker and Spitzer Manufacturing consider a price of 200 per unit? Why or why not?

Textbook

Cost Accounting: A Managerial Emphasis, Canadian Edition

Edition: 7^th

Authors: Horngren, Datar, Rajan, Beaubien

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