Kitchens Sales Inc. is approached by Mr. Louis Cifer, 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 $554 Direct labor 364 Variable manufacturing support 56 Fixed manufacturing support 120 Total manufacturing costs 1,094 Markup (50%) 547 Targeted selling price $1,641 Kitchens Sales inc. has excess capacity. Mr. Cifer wants the cabinets in cherry rather than oak, so direct material costs will increase by $66 per unit. The average marketing cost of Kitchens Sales product is $173 per order. Other than price, what other items should Kitchens Sales consider before accepting this one-time-only special order

Question

Ciara Melton

Business

14 April, 01:07

Kitchens Sales Inc. is approached by Mr. Louis Cifer, 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 $554 Direct labor 364 Variable manufacturing support 56 Fixed manufacturing support 120 Total manufacturing costs 1,094 Markup (50%) 547 Targeted selling price $1,641 Kitchens Sales inc. has excess capacity. Mr. Cifer wants the cabinets in cherry rather than oak, so direct material costs will increase by $66 per unit. The average marketing cost of Kitchens Sales product is $173 per order. Other than price, what other items should Kitchens Sales consider before accepting this one-time-only special order

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Answers (1)

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Scott Hampton · Answer 1

1. Is it an order outside normal market.

2. other orders at the going price.

Explanation:

Decision making in managerial accounting should focus on both the quantitative (dollars) and qualitative (other factors) effects of a decision.

Kitchens Sales Inc. should also consider if it is an order outside the normal market for cherry cabinets. Reducing prices in Normal Market in an attempt to unload spare capacity may lead to a fall in market price.

Also they should consider if accepting the special order may prevent company from accepting other orders that may be obtained during the period at the going price.