Zolas' Heaters is approached by Ms.Leila,a new customer,to fulfill a large one-time-only special order for a product similar to one offered to regular customers.Zolas' Heaters has excess capacity.The following per unit data apply for sales to regular customers: $$\begin{array} { l r }
\text { Direct materials } & \$ 400 \
\text { Direct manufacturing labor } & 120 \
\text { Variable manufacturing support } & 60 \
\text { Fixed manufacturing support } & 200 \
\quad \text { Total manufacturing costs } & 780 \
\text { Markup (20\% of total manufacturing costs) } & 156 \
\text { Estimated selling price } & \$ 936
\end{array}$$ If Ms.Leila wanted a long-term commitment,and not a one-time-special order,for supplying this product,calculate the most likely price to be quoted assuming the markup remains same?
A) $780
B) $580
C) $520
D) $936

Question

Zolas' Heaters is approached by Ms.Leila,a new customer,to fulfill a large one-time-only special order for a product similar to one offered to regular customers.Zolas' Heaters has excess capacity.The following per unit data apply for sales to regular customers: $$\begin{array} { l r } 
\text { Direct materials } & \$ 400 \
\text { Direct manufacturing labor } & 120 \
\text { Variable manufacturing support } & 60 \
\text { Fixed manufacturing support } & 200 \
\quad \text { Total manufacturing costs } & 780 \
\text { Markup (20\% of total manufacturing costs) } & 156 \
\text { Estimated selling price } & \$ 936
\end{array}$$ If Ms.Leila wanted a long-term commitment,and not a one-time-special order,for supplying this product,calculate the most likely price to be quoted assuming the markup remains same?
A) $780
B) $580
C) $520
D) $936

Quizplus · Accepted Answer

For a long-term commitment, the price would include the markup on total manufacturing costs, which is $936.

Zolas' Heaters Is Approached by Ms If MsLeila Wanted a Long-Term Commitment,and Not a One-Time-Special Order,for Supplying