Taylor Electronics, Inc. (TEI), has been approached by a new customer who wants to place a one-tirme order for a component similar to one that TEI makes for another custorner. Existing sales will not be affected by acceptance of this order. TEI has a policy of setting its targeted selling price at 60 percent over full manufacturing cost. The manufacturing costs and the targeted selling price for the component currently being made are as follows: Direct materials Direct labor $ 2.30 3.60 Variable manufacturing overhead (75% of direct labor cost) Fixed manufacturing overhead (150% of direct labor cost) Total manufacturing cost Markup (60% of full manufacturing cost) Targeted selling price 2.70 5.40 $14.00 8.40 $22.40 TEI has excess capacity to produce the quantity of the component desired by the new customer. The direct materials used in the component for the new customer would cost the manufacturer $.25 less than those in the component currently being made. The variable selling expenses (packaging and shipping) would be the same as for the component currently being made, or $.90 per unit.

Taylor Electronics, Inc. (TEI), has been approached by a new customer who wants to place a one-tirme order for a component similar to one that TEI makes for another custorner. Existing sales will not be affected by acceptance of this order. TEI has a policy of setting its targeted selling price at 60 percent over full manufacturing cost. The manufacturing costs and the targeted selling price for the component currently being made are as follows: Direct materials Direct labor $ 2.30 3.60 Variable manufacturing overhead (75% of direct labor cost) Fixed manufacturing overhead (150% of direct labor cost) Total manufacturing cost Markup (60% of full manufacturing cost) Targeted selling price 2.70 5.40 $14.00 8.40 $22.40 TEI has excess capacity to produce the quantity of the component desired by the new customer. The direct materials used in the component for the new customer would cost the manufacturer $.25 less than those in the component currently being made. The variable selling expenses (packaging and shipping) would be the same as for the component currently being made, or $.90 per unit.

Name: What is the minimum unit price at which TEI would be willing to accept
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Description: What is the minimum unit price at which TEI would be willing to accept the special order? Taylor Electronics, Inc. (TEI), has been approached by a new customer who wants to place aone-tirne order for a component similar to one that TEI makes for anot

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter17: Activity Resource Usage Model And Tactical Decision Making

Section: Chapter Questions

Problem 18E: A company is considering a special order for 1,000 units to be priced at 8.90 (the normal price...

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