Question

Fuller Company makes frames. A customer wants to place a special order for 600 frames in green with the company logo painted on the frame, to be priced at $40 each. Normally, Fuller would charge $90 per frame for this type of order. Fuller figures that wood and glass will cost $16 per frame, variable overhead (machining, electricity) is $4 per frame, direct labor is $12 per frame, and one setup will be required at $1,000 per setup. The set-up charge costs are 100% labor. Currently, the workers needed to set up for and make the frames are working at Fuller. Their wages will be paid whether or not the special order is accepted. Fuller's policy is to avoid layoffs to the extent possible.

Which of the following is a qualitative factor that Fuller would consider in making the decision to accept or reject the special order?

a.the no-layoff policy

b.the machining and electricity

c.the use of machinery

d.cost of yarn and backing

e.cost of setup labor

Answer 1

a.the no lay off policy.

The policy of not laying off any workers would be the qualitative decision taken in this regard by the fuller management.

Since their wages will be paid whether or not the special order is accepted, it would be better to accept the order so that there would be no layoffs of the workers.

Rest of the options are all directly related to costs and are quantitative factors.