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:
Agents
Representatives or intermediaries who act on behalf of others in various transactions or negotiations.
Principals
Individuals who have the primary responsibility and authority within an organization, often relating to decision making and financial commitments.
VIE Theory
An organizational theory that explains motivation through three components: valence, instrumentality, and expectancy.
Valence
Refers to how attractive or unattractive an outcome is for a person.
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