Silver Lake Cabinets Is Approached by Ms

question 46

Essay

Silver Lake Cabinets is approached by Ms. Jenny Zhang, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. The following per unit data apply for sales to regular customers:
Silver Lake Cabinets has excess capacity. Ms. Zhang wants the cabinets in cherry rather than oak, so direct material costs will increase by $30 per unit.
Required:
a. For Silver Lake Cabinets, what is the minimum acceptable price of this one-time-only special order?
b. Other than price, what other items should Silver Lake Cabinets consider before accepting this one-time-only special order?
c. How would the analysis differ if there was limited capacity?

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Definitions:

Alluvial Fans

Cone-shaped deposits of sediment crossed and built up by streams, typically found at the base of mountain ranges where a river exits a steep valley.

Upper Mississippi

Refers to the portion of the Mississippi River that flows from its headwaters to the confluence with the Missouri River.

Hard Rocks

Earth materials, such as granite and basalt, that are solid, tough, and resistant to weathering and erosion.

Ice Sheets

Large masses of glacial ice and snow that cover vast areas of land, such as those found in Antarctica and Greenland.