Question

In: Accounting

Brayton Inc. is a manufacturer of generators. Recently, the company was approached by a new customer...

Brayton Inc. is a manufacturer of generators. Recently, the company was approached by a new customer with a request for a one-time only special. The customer would like to buy 3,000 units of Brayton's generators. Although Brayton can produce 15,000 generators, actual production is 12,000.

The following is per unit data for sales to regular customers:

Direct materials: $1,275

Direct labor: $75

Variable overhead: $150

Fixed overhead: $120

Total Manufacturing Costs: $1,620

Markup (15%): $243

Estimated selling price: $1,863

Required:

(A) What is the minimum acceptable price of this one-time-only special order?

(B) Before accepting the one-time-only special order, what non-financial factors should Brayton consider?

(C) Now, assume that Brayton Inc. is operating at maximum capacity (i.e., producing 15,000 units) when management is asked to fulfill the special order. What would be the minimum acceptable price of this special order?

(D) If the customer wanted to form a long-term commitment for purchasing generators, what price should Brayton quote to the customer?

Solutions

Expert Solution


Related Solutions

Smooth Move Company manufactures professional paperweights and has been approached by a new customer with an...
Smooth Move Company manufactures professional paperweights and has been approached by a new customer with an offer to purchase 15 000 units at a per-unit price of R70. The new customer is geographically separated from Smooth Move's other customers, and existing sales will not be affected. Smooth Move normally produces 82 000 units but plans to produce and sell 65 000 in the coming year. The normal sales price is R120 per unit. Unit cost information is as follows: Direct...
Smooth Move Company manufactures professional paperweights and has been approached by a new customer with an...
Smooth Move Company manufactures professional paperweights and has been approached by a new customer with an offer to purchase 15,000 units at a per-unit price of $9.00. The new customer is geographically separated from Smooth Move's other customers, and existing sales will not be affected. Smooth Move normally produces 90,000 units but plans to produce and sell only 65,000 in the coming year. The normal sales price is $16 per unit. Unit cost information is as follows: Direct materials $3.10...
Generators R Us (GRU) is a leading manufacturer of partible electric generators used for emergency power...
Generators R Us (GRU) is a leading manufacturer of partible electric generators used for emergency power supply in both civil and private disaster situations. Each year it produces 16,000 of its model HI-360 units. This model used two bearings, which the company purchases from an outside vendor. A review of accounting and usage records reveals the following information: labour for installing the bearings = $8 per generator; • per-unit cost of bearings = $25; • delivery charges per order =...
a Janice Toy Inc. is a toy manufacturer in Hong Kong. Recently, the company introduced a...
a Janice Toy Inc. is a toy manufacturer in Hong Kong. Recently, the company introduced a new electronic bear to the market. Although there are no other companies that sell this type of toy, the sales figure is not ideal and customers are not aware of the toy. Suppose you are the marketing manager of this company. Identify and explain the stage of product life cycle that this toy falls into, and suggest the corresponding marketing actions to be taken....
Hat Tricks Company (HTC) is a Buffalo, New York, manufacturer of hats and gloves. Recently, the...
Hat Tricks Company (HTC) is a Buffalo, New York, manufacturer of hats and gloves. Recently, the company purchased a new machine to aid in producing the hat product lines. Production efficiency on the new machine increases with the workforce experience. It has been shown that as cumulative output on the new machine increases, average labor time per unit decreases up to the production of at least 3,200 units. As HTC’s cumulative output doubles from a base of 100 units produced,...
Hat Tricks Company (HTC) is a Buffalo, New York, manufacturer of hats and gloves. Recently, the...
Hat Tricks Company (HTC) is a Buffalo, New York, manufacturer of hats and gloves. Recently, the company purchased a new machine to aid in producing the hat product lines. Production efficiency on the new machine increases with the workforce experience. It has been shown that as cumulative output on the new machine increases, average labor time per unit decreases up to the production of at least 3,200 units. As HTC’s cumulative output doubles from a base of 100 units produced,...
Brent Bush, CFO of a medical device manufacturer, BioTron Medical, Inc., was approached by a Japanese...
Brent Bush, CFO of a medical device manufacturer, BioTron Medical, Inc., was approached by a Japanese customer, Numata, with a proposal to pay cash (in yen) for its typical orders of ¥15,000,000 every other month if it were given a 2.0% discount. Numata's current terms are 30 days with no discounts. Using the following quotes and estimated cost of capital for Numata, Bush will compare the proposal with covering yen payments with forward contracts. Spot rate, ¥/$ ¥111.40/$ 30-day forward...
Brent Bush, CFO of a medical device manufacturer, BioTron Medical, Inc., was approached by a Japanese...
Brent Bush, CFO of a medical device manufacturer, BioTron Medical, Inc., was approached by a Japanese customer, Numata, with a proposal to pay cash (in yen) for its typical orders of ¥15,000,000 every other month if it were given a 2.0% discount. Numata's current terms are 30 days with no discounts. Using the following quotes and estimated cost of capital for Numata, Bush will compare the proposal with covering yen payments with forward contracts. Spot rate, ¥/$ ¥111.40/$ 30-day forward...
Sue is a customer account representative for ABC Company. She recently acquired several new accounts when...
Sue is a customer account representative for ABC Company. She recently acquired several new accounts when a previous representative, Dan, took an early retirement. Sue reviewed each of Dan’s accounts to help familiarize herself with his clients and under- stand how she can better serve each one’s individual needs. As she was reviewing the client list, she found a major customer she had never heard of before. Surprised that she had not yet done business with the company, she called...
Q3 (20%) Crandle Manufacturers Inc. is approached by a potential customer to fulfill a one-time-only special...
Q3 (20%) Crandle Manufacturers Inc. is approached by a potential customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. The company has excess capacity. The following per unit data apply for sales to regular customers:                                         Variable costs:                                     Direct materials                    $140                                     Direct labor                             100                                     Manufacturing support          105                                                                   Fixed costs:                                     Manufacturing support          175                                     Marketing costs                        65                               Total costs                                     585                               Markup (50%)                             292.5                              ...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT