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Axle and Wheel 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$33

Direct labor15

Variable manufacturing support24

Fixed manufacturing support52

Total manufacturing costs124

Markup (50%)62

Targeted selling price$186

Axle and Wheel Manufacturing has excess capacity.

Required:

a. What is the full cost of the product per unit?

b. What is the contribution margin per unit?

c. Which costs are relevant for making the decision regarding this one-time-only special order? Why?

d. For Axle and Wheel Manufacturing, what is the minimum acceptable price of this one-time-only special order?

e. For this one-time-only special order, should Axle and Wheel Manufacturing consider a price of $100 per unit? Why or why not?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M942680

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