Axle and Wheel Manufacturing is approached by a European customer to fill a one-time-only special order for a product similar to one offered to domestic customers. The following per unit data apply for sales to regular customers:
Axle and Wheel Manufacturing has excess capacity.
Required:
a. What is the full cost of the product per unit?
b. What is the contribution margin per unit?
c. Which costs are relevant for making the decision regarding this one-time-only special order? Why?
d. For Axle and Wheel Manufacturing, what is the minimum acceptable price of this one-time-only special order?
e. For this one-time-only special order, should Axle and Wheel Manufacturing consider a price of $100 per unit? Why or why not?
Definitions:
Work Ethic
The principle that hard work is intrinsically virtuous or worthy of reward, often emphasizing diligence, discipline, and efficiency in one's professional life.
Corporate Culture
Corporate culture refers to the shared values, beliefs, ethics, and practices that characterize an organization, influencing its environment and how employees interact and conduct business.
Elvis Presley
An iconic American singer and actor, often referred to as the "King of Rock and Roll," who was a major cultural figure in the mid-20th century.
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