Parker and Spitzer Manufacturing Is Approached by a European Customer

question 59

Essay

Parker and Spitzer Manufacturing is approached by a European customer to fulfill 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:
$\begin{array}{lr}\text { Direct materials } & \$ 1,782 \\\text { Direct labor } & 810 \\\text { Variable manufacturing support } & 1,296 \\\text { Fixed manufacturing support } & 2,808 \\\quad \text { Total manufacturing costs } & 6,696 \\\text { Markup (50\%) } & 3,348 \\\text { Targeted æelling price } & \$ 10,044\end{array}$ Parker and Spitzer Manufacturing has excess capacity.
Required:
a.What is the full cost of the product per unit if the marketing costs is $3,000?
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 Parker and Spitzer Manufacturing,what is the minimum acceptable price of this one-time-only special order?
e.For this one-time-only special order,should Parker and Spitzer Manufacturing consider a price of $5,400 per unit? Why or why not?

Understand the physiological differences in bone structure related to specific body parts (e.g., hands, feet, skull).

Recognize the relevance of skeletal anatomy in medical diagnostics and treatment.

Understand the concept of consumer preferences and how they are represented in economic models.

Grasp the assumptions underlying consumer choice theory, including completeness, transitivity, and nonsatiation.

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Definitions:

Profit

The financial gain achieved when the revenue from a business activity exceeds the expenses, costs, and taxes associated with maintaining the activity.

Demand Curve

A chart that depicts how the quantity of a product demanded by buyers is related to its price, usually sloping downwards.

Marginal Revenue

The additional income earned from selling one more unit of a good or service, crucial for decision-making on output levels.

Unit Elastic

A situation in economics where a change in the price of a product leads to a proportional change in the quantity demanded or supplied, resulting in an elasticity of exactly one.