Figure 13-1. Fuller Company Makes Frames. a Customer Wants to Place a Place

question 25

Multiple Choice

Figure 13-1.
Fuller Company makes frames. A customer wants to place a special order for 600 frames in green with the company logo painted on the frame, to be priced at $40 each. Normally, Fuller would charge $90 per frame for this type of order. Fuller figures that wood and glass will cost $16 per frame, variable overhead (machining, electricity) is $4 per frame, direct labor is $12 per frame, and one setup will be required at $1,000 per setup. The set-up charge costs are 100% labor. Currently, the workers needed to set up for and make the frames are working at Fuller. Their wages will be paid whether or not the special order is accepted. Fuller's policy is to avoid layoffs to the extent possible.
-Refer to Figure 13-1. Which of the following is a qualitative factor that Fuller would consider in making the decision to accept or reject the special order?

• A) cost of yarn and backing
• B) cost of setup labor
• C) the no-layoff policy
• D) the use of machinery
• E) the machining and electricity

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Definitions:

Subsidiary Sold Land

An event where a company owned by another company sells a piece of real estate.

Consolidated Sales

The total sales revenue of a parent company and its subsidiaries, reported as one figure in the consolidated financial statements.

Normal Markup

The standard percentage added to the cost of goods to determine their selling price.

Consolidated Sales

The total sales of a parent company and its subsidiaries, after eliminating intercompany sales, reported in the consolidated financial statements.