Brady Lumber Company is located in Northern Ontario in the city of Kenora. The company is a producer of oak lumber for furniture companies. Brady has received an offer to supply a special load of lumber for an exporter. The company estimates it will take three months to fill the order of 1,000,000 board meters. During the three months half of the company's production capacity will be utilized for the special order. The total fixed costs for the three months will be $6,000,000. Variable costs per 1,000 board meters will be $2,500.

The marketing manager for Brady Lumber believes that half of the capacity taken up by the special order can be utilized with regular business which will generate income of $240,000.

Complete the following:

a) Determine the minimum price that needs to be charged for the special order.

b) Explain why some costs are considered relevant while other costs would be considered irrelevant.

Answer rating: 100% (QA)

a To determine the minimum price that needs to be charged for the special order we need to calculate ... View the full answer