Wilson Vistas is a leading producer of vinyl replacement windows. The company's growth strategy focuses on developing domestic markets in large metropolitan areas. The company operates a single manufacturing plant in Kansas City with an annual capacity of 500,000 windows. Current production is budgeted at 450,000 windows per year, a quantity that has been constant over the past three years. Based on the budget, the accounting department has calculated the following unit costs for the windows:

Direct materials ...................................... $40

Direct labor ............................................. 18

Manufacturing overhead ............................. 20

Selling and administrative ........................... 14

Total unit cost ......................................... $92

The company's budget includes $5,400,000 in fixed overhead and $3,150,000 in fixed selling and administrative expenses. The windows sell for $150 each. A 2% distributor's commission is included in the selling and administrative expenses.

Required

a. ScandiHomes, Finland's second largest homebuilder, has approached Wilson with an offer to buy 75,000 windows during the coming year. Given the size of the order, ScandiHomes has requested a 40% volume discount on Wilson's normal selling price. Should Wilson grant ScandiHomes' request?

b. List the qualitative issues Wilson should consider in deciding whether to grant ScandiHomes' request for a discount. For each issue you list, identify whether or not it supports a decision to grant ScandiHomes' request.

c. Return to the original data. Monk Builders has just signed a contract with the state government to replace the windows in low-income housing units throughout the state. Monk needs 80,000 windows to complete the job and has offered to buy them from Wilson at a price of $100 per window. Monk will pick up the windows at Wilson's plant, so Wilson will not incur the $2 per window shipping charge. In addition, Wilson will not need to pay a distributor's commission, since the windows will not be sold through a distributor. Should Wilson accept Monk's offer?

d. If Wilson decides to accept Monk's offer, it will need to find an additional 30,000 windows to meet both the special order and normal sales. Panorama Panes has offered to provide them to Wilson at a price of $120 per window. Panorama Panes will deliver the windows to Wilson, and Wilson would then distribute them to its customers. Should Wilson outsource the production of the extra windows to Panorama Panes?