Author Question: Loft Lake Cabinets is approached by Ms. Jenny Zhang, a new customer, to fulfill a large ... (Read 66 times)

Coya19@aol.com · **on:** Mar 6, 2021

Loft 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

$50.00

Direct labor

62.50

Variable manufacturing support

30.00

Fixed manufacturing support

37.50

Total manufacturing costs

180.00

Markup (60%)

108.00

Targeted selling price

$288.00

Loft Lake Cabinets has excess capacity. Ms. Zhang wants the cabinets in cherry rather than oak, so direct material costs will increase by $15 per unit.

Required:

a.	For Loft Lake Cabinets, what is the minimum acceptable price of this one-time-only special

order?

b.	Other than price, what other items should Loft Lake Cabinets consider before accepting this

one-time-only special order?

c.	How would the analysis differ if there was limited capacity?

blazinlyss · **Reply #1 on:** Mar 6, 2021

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