Greentree Incorporated Manufactures Rustic Furniture

Essay

Greentree Incorporated manufactures rustic furniture. The cost accounting system estimates manufacturing costs to be $120 per table, consisting of 60% variable costs and 40% fixed costs. The company has surplus capacity available. It is Greentree's policy to add a 30% markup to full costs.
a.Greentree Incorporated is invited to bid on an order to supply 100 rustic tables. What is the lowest price Greentree 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 rustic style. Greentree Incorporated is invited to submit a bid to the hotel chain. What is the lowest price per unit Greentree should bid on this long-term order?