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:
Variable manufacturing support24
Fixed manufacturing support52
Total manufacturing costs124
Targeted selling price$186
Axle and Wheel Manufacturing has excess capacity.
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?