Essay
Bluegum Incorporated manufactures coffee tables.The cost accounting system estimates manufacturing costs to be $100 per table,consisting of 70% variable costs and 30% fixed costs.The company has surplus capacity available.It is Bluegum's policy to add a 50% mark-up to full costs.
a.Bluegum Incorporated is invited to bid on an order to supply 100 coffee tables.What is the lowest price Bluegum should bid on this one-time-only special order?
b.A large hotel chain is currently expanding and has decided to decorate all new hotels using the Bluegum style.Bluegum Incorporated is invited to submit a bid to the hotel chain.What is the lowest price per unit Bluegum should bid on this long-term order?
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