Answer the following questions using the information below:
Acacia Furniture manufactures rustic furniture.The cost accounting system estimates manufacturing costs to be $140 per table,consisting of 60% variable costs and 40% fixed costs.The company has surplus capacity available.It is Acacia Furniture's policy to add a 50% mark-up to full costs.
-Acacia Furniture is invited to bid on a one-time-only special order to supply 250 rustic tables.What is the lowest price Acacia Furniture should bid on this special order?
A)$21 000
B)$7200
C)$14 400
D)$12 000

Question

Quizplus · Accepted Answer

The lowest price Acacia Furniture should bid on this special order is $14,400. This is calculated by taking the full cost of $140 per table and adding a 50% mark-up, which results in a price of $210 per table. Multiplying this by the number of tables ordered (250) gives a total price of $52,500. However, since the company has surplus capacity available, it can afford to bid lower than this price. The lowest price it should bid is the variable cost per table, which is 60% of the full cost, or $84 per table. Multiplying this by the number of tables ordered gives a total price of $21,000.

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