Answer the Following Questions Using the Information Below

question 150

Multiple Choice

Answer the following questions using the information below:
Acacia Furniture manufactures rustic furniture.The cost accounting system estimates manufacturing costs to be $140 per table,consisting of 60% variable costs and 40% fixed costs.The company has surplus capacity available.It is Acacia Furniture's policy to add a 50% mark-up to full costs.
-Acacia Furniture is invited to bid on a one-time-only special order to supply 250 rustic tables.What is the lowest price Acacia Furniture should bid on this special order?

• A)$21 000
• B)$7200
• C)$14 400
• D)$12 000

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Definitions:

Sunk Costs

Costs that have already been incurred and cannot be recovered or altered by any present or future decisions.

Fixed Period

A specified duration of time during which certain conditions or rules are applied or must be followed.

Costs

Expenses incurred in the production and distribution of a product or in the provision of a service.

Option to Abandon

A business decision tool that allows a company to cease investment in a project if it no longer becomes financially viable.