If Ms. Wang wanted a long-term commitment for supplying this product, this analysis

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.



If Ms. Wang wanted a long-term commitment for supplying this product, this analysis

a. would definitely be different.

b. may be different.

c. would not be different.

d. does not contain enough information to determine if there would be a difference.


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