If Ms. Leila wanted a long-term commitment, and not a one-time-special order, for supplying this product, calculate the most likely price to be quoted assuming the markup remains same?
Zolas' Heaters is approached by Ms. Leila, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. Zolas' Heaters has excess capacity. The following per unit data apply for sales to regular customers:
Direct materials $400
Direct manufacturing labor 120
Variable manufacturing support 60
Fixed manufacturing support 200
Total manufacturing costs 780
Markup (20% of total manufacturing costs) 156
Estimated selling price $936
A) $780
B) $580
C) $520
D) $936
Answer: D
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