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.
-A large hotel chain is currently expanding and has decided to decorate all new hotels using the rustic style.Acacia Furniture is invited to submit a bid to the hotel chain.What per unit price will Acacia Furniture MOST likely bid on this long-term order?
A)$108 per unit
B)$72 per unit
C)$210 per unit
D)$140 per unit

Question

Quizplus · Accepted Answer

The full cost per unit of the table can be calculated as follows:
Variable cost = 60% of $140 per unit = $84 per unit
Fixed cost = 40% of $140 per unit = $56 per unit
Total cost = $84 + $56 = $140 per unit
Mark-up price = 50% of $140 per unit = $70 per unit
Selling price = Total cost + Mark-up price = $140 + $70 = $210 per unit
Therefore, Acacia Furniture will most likely bid $210 per unit to the hotel chain.

Answer the Following Questions Using the Information Below