**PROBLEM #1 SPECIAL ORDER**

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:

Direct materials $66

Direct labor 30

Variable manufacturing support 48

Fixed manufacturing support 104

Total manufacturing costs 248

Markup (50%) 124

Targeted selling price $372

Parker and Spitzer 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 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 $200 per unit? Why or why not?

**PROBLEM #2 SCARCE RESOURCES**

25) Ralph's Mufflers manufactures three different product lines, Model X, Model Y, and Model Z. Considerable market demand exists for all models. The following per unit data apply:

**Model X** **Model Y Model Z**

Selling price $160 $180 $200

Direct materials 60 60 60

Direct labor ($20 per hour) 30 30 40

Variable support costs ($10 per machine-hour) 10 20 20

Fixed support costs 40 40 40

a. For each model, compute the contribution margin per unit.

b. For each model, compute the contribution margin per machine-hour.

c. If there is excess capacity, which model is the most profitable to produce? Why?

d. If there is a machine breakdown, which model is the most profitable to produce? Why?

e. How can Ralph encourage her sales people to promote the more profitable model?

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Subject | Business |

Due By (Pacific Time) | 05/08/2014 01:00 pm |

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