Loft Lake Cabinets is approached by Ms. Jenny Zhang, 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:

Loft Lake Cabinets has excess capacity. Ms. Zhang wants the cabinets in cherry rather than oak, so direct material costs will increase by $15 per unit.
Required:
a.For Loft Lake Cabinets, what is the minimum acceptable price of this one-time-only special order?
b.Other than price, what other items should Loft Lake Cabinets consider before accepting this one-time-only special order?
c.How would the analysis differ if there was limited capacity?

Question

Loft Lake Cabinets is approached by Ms. Jenny Zhang, 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:
  
Loft Lake Cabinets has excess capacity. Ms. Zhang wants the cabinets in cherry rather than oak, so direct material costs will increase by $15 per unit.
Required:
a.For Loft Lake Cabinets, what is the minimum acceptable price of this one-time-only special order?
b.Other than price, what other items should Loft Lake Cabinets consider before accepting this one-time-only special order?
c.How would the analysis differ if there was limited capacity?

Quizplus · Accepted Answer

The Answer of Loft Lake Cabinets is approached by Ms. Jenny Zhang, 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:
  
Loft Lake Cabinets has excess capacity. Ms. Zhang wants the cabinets in cherry rather than oak, so direct material costs will increase by $15 per unit.
Required:
a.For Loft Lake Cabinets, what is the minimum acceptable price of this one-time-only special order?
b.Other than price, what other items should Loft Lake Cabinets consider before accepting this one-time-only special order?
c.How would the analysis differ if there was limited capacity?

Loft Lake Cabinets Is Approached by Ms