Taylor's Tables manufactures dining tables sold to retailers for $300 each. The plant capacity is 200,000...
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Accounting
Taylor's Tables manufactures dining tables sold to retailers for $300 each. The plant capacity is 200,000 units annually, but normal volume is 150,000 units. The unit and total costs at normal volume are as follows:
Type of Cost
Unit Costs
Total Costs
Direct materials
$80.00
$12,000,000
Direct labor
$50.00
$7,500,000
Manufacturing support
$100.00
$15,000,000
Selling and administrative
$30.00
$4,500,000
Total costs
$260.00
$39,000,000
Fixed manufacturing support costs are $8,000,000, and fixed selling and administrative costs are $3,000,000.
A new client offers to buy 50,000 tables at $200 each, with bulk packaging reducing variable selling and administrative costs by 50%.
Required: Determine whether Taylor's Tables should accept this special order. Prepare a cost-benefit analysis to support your decision.
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