Problem: Parker and Spitzer Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. The following per unit data apply for sales to regular customers:
Direct materials $66
Direct labor 30
Variable manufacturing support 48
Fixed manufacturing support 104
Total manufacturing costs 248
Markup (50%) 124
Targeted selling price $372
Parker and Spitzer Manufacturing has excess capacity.
Required:
Q1. What is the full cost of the product per unit?
Q2. What is the contribution margin per unit.
Q3. Which costs are relevant for making the decision regarding this one-time-only special order? Why?
Q4. For Parker and Spitzer Manufacturing, what is the minimum acceptable price of this one-time-only special order?
Q5. For this one-time-only special order, should Parker and Spitzer Manufacturing consider a price of $200 per unit? Why or why not?