Grounded Coffee Products manufactures coffee tables. Grounded Coffee Products ha
ID: 2452721 • Letter: G
Question
Grounded Coffee Products manufactures coffee tables. Grounded Coffee Products has a policy adding a 20% markup to full costs and currently has excess capacity. The following information pertains to the company's normal operations per month: Grounded Coffee Products is approached by an overseas customer to fulfill a one - time - only special order for 1,000 units. All cost relationships remain the same except for a one - time setup charge of $20,000. No additional design, marketing, or distribution costs will be incurred. What is the minimum acceptable bid per unit on the one - time - only special order?Explanation / Answer
Answer: Option - A = $146.125
As the firm has excess capacity, the relevant cost for the special order is the variable cost and set up cost to be incurred specifically for this order.
Variable cost per unit: a) Direct material per unit 105 b) Direct Labor cost per unit 5 ($10000/20000)*$10 c) Variable manufacturing OH cost per unit: 16.125 Total variable cost per unit 126.125 No. of units required 1000 Total variable cost to be incurred 126125 Add: One time set up charges 20000 Total additional cost to be incurred 146125 Minimum acceptable bid per unit $146.125 ($146,125/1000)Related Questions
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