Jeremy’s Desks is approached by Mr. Harry Hood, 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 $455
Direct labor 300
Variable manufacturing support 45
Fixed manufacturing support 100
Total manufacturing costs 900
Markup (60%) 540
Targeted selling price $1440
Jeremy’s Desks has excess capacity. Mr. Hood wants the desks in bamboo rather than maple, so direct material costs will increase by $30 per unit.
For Jeremy’s Desks, what is the minimum acceptable price of this one-time-only special order?
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