Q.1 (b) A client approached to Incredible Fabricating and Manufacturing for a one-time special order for Steel doors. These Steel doors are fabricated and manufactured to local clients regularly. The cost per unit information apply for deals to regular clients: Direct materials $1,982 Direct labor 810 Variable manufacturing overhead 1,296 Fixed manufacturing overhead 2,808 Total manufacturing costs 6,896 Markup (50%) 3,348 Targeted selling price $ 10,244 Incredible Fabricating and Manufacturing has ample idle capacity. Required: What is the full cost of the product per unit if the marketing costs is $2,000? What is the contribution margin per unit? Which costs are relevant for making the decision regarding this one-time-only special order? Why? For Incredible Fabricating and Manufacturing, what is the minimum acceptable price of this one-time-only special order? For this one-time-only special order, should Incredible Fabricating and Manufacturing consider a price of $5,400 per unit? Why or why not?
Q.1 (b) A client approached to Incredible Fabricating and Manufacturing for a one-time special order for Steel doors. These Steel doors are fabricated and manufactured to local clients regularly. The cost per unit information apply for deals to regular clients: Direct materials $1,982 Direct labor 810 Variable manufacturing overhead 1,296 Fixed manufacturing overhead 2,808 Total manufacturing costs 6,896 Markup (50%) 3,348 Targeted selling price $ 10,244 Incredible Fabricating and Manufacturing has ample idle capacity. Required: What is the full cost of the product per unit if the marketing costs is $2,000? What is the contribution margin per unit? Which costs are relevant for making the decision regarding this one-time-only special order? Why? For Incredible Fabricating and Manufacturing, what is the minimum acceptable price of this one-time-only special order? For this one-time-only special order, should Incredible Fabricating and Manufacturing consider a price of $5,400 per unit? Why or why not?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Q.1 (b) A client approached to Incredible Fabricating and Manufacturing for a one-time special order for Steel doors. These Steel doors are fabricated and manufactured to local clients regularly.
The cost per unit information apply for deals to regular clients:
Direct materials $1,982
Direct labor 810
Variable manufacturing
Fixed manufacturing overhead 2,808
Total
Markup (50%) 3,348
Targeted selling price $ 10,244
Incredible Fabricating and Manufacturing has ample idle capacity.
Required:
- What is the full cost of the product per unit if the marketing costs is $2,000?
- What is the contribution margin per unit?
- Which costs are relevant for making the decision regarding this one-time-only special order? Why?
- For Incredible Fabricating and Manufacturing, what is the minimum acceptable price of this one-time-only special order?
- For this one-time-only special order, should Incredible Fabricating and Manufacturing consider a price of $5,400 per unit? Why or why not?
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