accounting-Consider the following information, prepared based on a monthly capacity of 50,000 units:

$26.00

Description

Consider the following information, prepared based on a monthly capacity of 50,000 units:

Category

Cost per Unit

Variable manufacturing costs

$12.00

Fixed manufacturing costs

$1.00

Variable marketing costs

$3.00

Fixed marketing costs

$2.00

Capacity cannot be added in the short run and the firm currently sells the product for $20 per unit.

Consider each of these scenarios independent of each other.

a) The company is currently producing 50,000 units per month. A potential customer has contacted the firm and offered to purchase 10,000 units this month only. The customer is willing to pay $18 per unit. Since the potential customer approached the firm, there will be no variable marketing costs incurred. Should the company accept the special order? Why or why not? Be specific.

My answer (what I think is right)

Total capacity = 50,000 units

Current Production = 50,000 units

Offer = 10,000

Profit per unit= $18 – $12 =$6.00

10,000 units x $6.00 = $60,000

Yes the company should accept the order because operating income will increase by $60,000 ($18-$12) x 10,000 units and the offer selling price per unit is higher than the variable manufacturing costs.

This is an example of how the professor wants the questions to be answer

Current

With Order

Units sold

30,000

40,000

Rev

$300,000

$355,000

Var man

$150,000

$200,000

Var mktg

$30,000

$30,000

CM

$120,000

$125,000

Fixed man

$60,000

$60,000

Fixed mktg

$20,000

$20,000

Operating income

$40,000

$45,000

Yes, because OI will increase by $5,000 ($5.50 – $5.00) x 10,000 units

b) The company is currently producing 40,000 units per month. A potential customer has contacted the firm and offered to purchase 10,000 units this month only. Since the potential customer approached the firm, there will be no variable marketing costs incurred. What is the minimum amount that the firm should be willing to accept for this order?

This is an example of how the professor wants the questions to be answer

(Lost revenue = $4.50 per unit, savings = $1 per unit)

Current

With Order

Units sold

40,000

40,000

Rev

$400,000

$355,000

Var man

$200,000

$200,000

Var mktg

$40,000

$30,000

CM

$160,000

$125,000

Fixed man

$60,000

$60,000

Fixed mktg

$20,000

$20,000

Operating income

$80,000

$45,000


Question #3 (44 points)

Consider the following information:

Q1

Q2

Q3

Beginning inventory (units)

0

J

1,100

Budgeted units to be produced

20,000

20,000

20,000

Actual units produced

19,000

20,600

Q

Units sold

A

20,600

R

Variable manufacturing costs per unit produced

$150

$150

$150

Variable marketing costs per unit sold

$20

$20

$20

Budgeted fixed manufacturing costs

$500,000

$500,000

$500,000

Fixed marketing costs

$200,000

$200,000

$200,000

Selling price per unit

$300

$300

$300

Variable costing operating income

B

$1,978,000

S

Absorption costing operating income

C

K

$1,859,000

Variable costing beginning inventory ($)

D

$165,000

T

Absorption costing beginning inventory ($)

E

L

U

Variable costing ending inventory ($)

F

M

$75,000

Absorption costing ending inventory ($)

G

N

$87,500

PVV

H

O

V

Allocated fixed manufacturing costs

I

P

$480,000

There are no price, efficiency, or spending variances, and any production-volume variance is directly written off to cost of goods in the quarter in which it occurs.

Complete the missing figures from the above Table. You need to show your work in order to be eligible for partial credit.

Q1

Q2

Q3

A

J

Q

B

K

R

C

L

S

D

M

T

E

N

U

F

O

V

G

P

H

I

Reviews

There are no reviews yet.

Be the first to review “accounting-Consider the following information, prepared based on a monthly capacity of 50,000 units:”

Your email address will not be published. Required fields are marked *