Wood-Lover Furniture Manufacturing is approached by Mr. Albert Cheung, a new customer, to fulfill a large one-time-only special order for a cabinet similar to one offered to regular customers. The following per unit data apply 

for sales to regular customers:

 

Direct material cost $546

Direct labor cost 360

Variable manufacturing overhead cost 54

Fixed manufacturing overhead cost 120

Total product cost 1,080

Markup (60%) 648

Targeted selling price $1,728

Wood-Lover Furniture Manufacturing has excess capacity. Mr. Cheung wants the cabinets in cherry rather than oak, so direct material costs will increase to $600 per unit. The average marketing cost of Wood-Lover Furniture 

Manufacturing is $180 per unit.

 

Required

1. For Wood-Lover Furniture Manufacturing, what is the per unit relevant cost of the one-time-only special order?
2. If Mr. Cheung offered to purchase the specialized cabinet at $1,500 per unit, should Wood-Lover Furniture Manufacturing accept this special order? Why?
3. Discuss two factors Wood-Lover Furniture Manufacturing should consider before accepting this special order.

Answer rating: 100% (QA)

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