1. Calculate the incremental, or marginal, cost per chair to LP of accepting the order from Southeast.

2. What assumptions did you make in calculating the incremental cost in Question 1? What additional information would be helpful in making these calculations?

3. Based on your answers to Questions 1 and 2, should LP accept the Southeast order?

4. What additional considerations might lead LP to reject the order?

The Leisure Products (LP) Company manufactures lawn and patio furniture. Most of its output is sold to do-it-yourself warehouse stores (e.g., Lowe’s Home Improvement) and to retail hardware and department store chains (e.g., True Value and JCPenney), who then distribute the products under their respective brand names. LP is not involved in direct retail sales. Last year the firm had sales of $35 million.