Calculate net profit increase

Assignment Help Financial Management
Reference no: EM13880713

Mercury Skateboard Company manufactures skateboards. Several weeks ago, the firm received a special-order inquiry from Venus, Inc. Venus desires to market a skateboard similar to one of Mercury's and has offered to purchase 11,000 units if the order can be completed in three months. The cost data for Mercury's Champion model skateboard follow. Direct material $16.40 Direct labor: (.25 hour at $18.00) 4.50 Total manufacturing overhead: (.5 machine hours at $40.00) 20.00 Total $40.90 The following additional information is available. - The normal selling price of the Champion model is $53.00; however, Venus has offered Mercury only $31.50 because of the large quantity it is willing to purchase. - Venus requires a modification of the design that will allow a $4.20 reduction in direct-material cost. - Mercury's production supervisor notes that the company will incur $7,400 in additional setup costs and will have to purchase a $4,800 special device to manufacture these units. The device will be discarded once the special order is completed. - Total manufacturing overhead costs are applied to production at the rate of $40 per machine hour. This figure is based, in part, on budgeted yearly fixed overhead of $1,500,000 and planned production activity of 60,000 machine hours (5,000 per month). - Mercury will allocate $3,600 of existing fixed administrative costs to the order as "… part of the cost of doing business." Calculate the net contribution margin.

1. Calculate the net profit increase or (decrease) from accepting the special order. (Do not round intermediate calculations.)

2. Assume that Mercury’s current production activity consumes 70 percent of planned machine-hour activity. Calculate the current available machine-hours.

Reference no: EM13880713

Questions Cloud

What is the holding period yield on your investment : The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY)b1. Two years from now, the YTM on your..
Measurements of the local convection coefficient : Parallel flow of atmospheric air over a flat plate of length L = 3 m is disrupted by an array of stationary rods placed in the flow path over the plate.
Currency appreciation is good for country : “A currency appreciation is good for a country, and currency depreciation is bad”. Please comment on this statement. Does this require a particular exchange rate regime? A level of International Reserves?
The set of functions g for which there exist positive : Given f : R → R let O(f) be the set of functions g for which there exist positive constants c,a ∈ R such that |g(x)| ≤ c|f(x)| for all x > a. Define a relation R on the set S of functions mapping from R to R by (g,h)∈R if and only if g-h∈O(f). Prove ..
Calculate net profit increase : Mercury Skateboard Company manufactures skateboards. Several weeks ago, the firm received a special-order inquiry from Venus, Inc. Venus desires to market a skateboard similar to one of Mercury's and has offered to purchase 11,000 units if the order ..
Which firm will serve the market : Would your answer change if firms A and B had somewhat greater fixed costs of production than firms C and D?
Dimensional finite difference equation : One of the strengths of numerical methods is their ability to handle complex boundary conditions. In the sketch, the boundary condition changes from specified heat flux, if: (into the domain), to convection, at the location of the node m, n. Write..
Which of following should be provided for in salary ranges : Which of the following should be provided for in salary ranges? Which one of the following organizational qualities is least valuable in determining who should participate in a pay survey
Difference in the equations developed for requirements : Scatter Diagrams and High-Low Cost Estimation From April 1 through October 31, Will County Highway Department hires temporary employees to mow and clean the right-of-way along county roads. What factors might have caused the difference in the equatio..

Reviews

Write a Review

 

Financial Management Questions & Answers

  What is the preferred stock price if the required rate

An issue of preferred stock is paying an annual dividend of $5. The growth rate for the firms common stock is $14. What is the preferred stock price if the required rate of return is 11%.

  What is now your effective interest rate

If you’re average daily balance on your credit card in June is $1,200 and your APR is 18%, how much interest do you pay the next billing cycle? If you also incurred a $29 late charge, what is now your effective interest rate?

  Nonproduction expenses such as marketing

Nonproduction expenses such as marketing, research and development, and general administrative costs can play an important role in a company's ability to meet long-term goals. Discuss how the budgets for each of these costs contribute to the company'..

  Consumers lose-surplus and suppliers lose

If as a result of taxation, consumers lose $30 surplus and suppliers lose $50 surplus, which of the following may be the size of DWL and the tax revenue received by government assuming that there was also $10 administrative burden?

  After-tax cash flows

Find the PI. Cost of capital is 10.2%. The initial outlay is $256, 900. The following after-tax cash flows:

  Parallel shift in the corporate debt term structure

In December 1995 Boise Cascade’s stock had a beta of 0.95.The Treasury bill rate at the time was 5.8% and the Treasury bond rate was 6.4% The firm had debt outstanding of $1.7 billion and a market value of equity of $1.5 billion; Assume Boise Cascade..

  What is appropriate cost of capital to evaluate the business

Verano Inc. has two business divisions a software product line and a waste water clean-up product line. The software business has a cost of equity capital of 10% and the waste water clean-up business has a cost of equity capital of 7%. Verano has 50%..

  Current share price problem

Far Side Corporation is expected to pay the following dividends over the next four years: $11 in year 1, $8 in year 2, $5 in year 3, and $2 in year 4. Afterward, the company pledges to maintain a constant 5 percent growth rate in dividends forever. I..

  When computing estimated capital budgeting cash flows

When computing estimated Capital Budgeting cash flows, you want the cash flow to be ____.

  Price of the flowers will increase

When Marilyn Monroe died ex-husband Joe DiMaggio vowed to place fresh flowers on her grave every Sunday as long as he lived. The week after she died in 1962, a bunch of fresh flowers that the former baseball player thought appropriate for the star co..

  Evaluate the integrated control theory model presented by

evaluate the integrated control theory model presented by klein 1989 and its usefulness in contemporary organizations.

  Numerator in computing return on investment-flexible budget

A static budget report is appropriate for. The flexible budget report includes all of the following sections except. Controllable fixed costs are deducted from the contribution margin to arrive at.  The numerator in computing return on investment is

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd