Taylor's Tables manufactures dining tables sold to retailers for $300 each. The plant capacity is 200,000...
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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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