For Grant’s Kitchens, what is the minimum acceptable price of this one-time-only special order?

ACCOUNTING

Multiple Choice

Grant’s Kitchens is approached by Ms. Tammy Wang, 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 $455

Direct labor 300

Variable manufacturing support 45

Fixed manufacturing support 100

Total manufacturing costs 900

Markup (60%) 540

Targeted selling price $1440



Grant’s Kitchens has excess capacity. Ms. Wang wants the cabinets in cherry rather than oak, so direct material costs will increase by $30 per unit.



For Grant’s Kitchens, what is the minimum acceptable price of this one-time-only special order?

a. $830

b. $930

c. $785

d. $1440


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