Costing term, Cost Accounting

The San Carlos Company is an electronics business with eight product lines. Income data for one of the products (XT-107) for June 2011 are as follows: Revenues, 200,000 units at average price of $100 each $20,000,000 Variable costs Direct materials at $35 per unit $7,000,000 Direct manufacturing labor at $10 per unit 2,000,000 Variable manufacturing overhead at $6 per unit 1,200,000 Sales commissions at 15% of revenues 3,000,000 Other variable costs at $5 per unit 1,000,000 Total variable costs 14,200,000 Contribution margin 5,800,000 Fixed costs 5,000,000 Operating income $ 800,000 Abrams, Inc., an instruments company, has a problem with its preferred supplier of XT-107. This supplier has had a three-week labor strike. Abrams approaches the San Carlos sales representative, Sarah Holtz, about providing 3,000 units of XT-107 at a price of $75 per unit. Holtz informs the XT-107 product manager, Jim McMahon, that she would accept a flat commission of $8,000 rather than the usual 15% of revenues if this special order were accepted. San Carlos has the capacity to produce 300,000 units of XT-107 each month, but demand has not exceeded 200,000 units in any month in the past year. • 1. If the 3,000-unit order from Abrams is accepted, how much will operating income increase or decrease? (Assume the same cost structure as in June 2011.) • 2. McMahon ponders whether to accept the 3,000-unit special order. He is afraid of the precedent that might be set by cutting the price. He says, "The price is below our full cost of $96 per unit. I think we should quote a full price, or Abrams will expect favored treatment again and again if we continue to do business with it." Do you agree with McMahon? Explain.

Posted Date: 2/28/2014 2:11:05 AM | Location : United States







Related Discussions:- Costing term, Assignment Help, Ask Question on Costing term, Get Answer, Expert's Help, Costing term Discussions

Write discussion on Costing term
Your posts are moderated
Related Questions

Automotive Products  (AP)  designs, manufactures,  and  sells  automotive  parts.  It  has  3 main operating departments: design, engineering, and production.  1.Design  ñ  the

The Zooline Company (Pty) Ltd is an American based company that focuses on the LSM 8 -10 markets. They do vehicle interiors, raise or lower suspensions and install top end sound sy

You work for a firm of accountants as a junior accounts assistant and part of your role is to prepare clients' ledgers accounts from incomplete records. A client of the firm you

2012                     2011 Cash                               12200                 17700 Acct receivable                  25200                  22300 Investments

A retailer knows the annual demand for one of its product is 100,000 units, the ordering costs are £25 per order and the average carrying cost per unit is 35 pence. You are require

Problem: A satellite is launched into Earth orbit by a Delta II launch vehicle (LV).  The Delta LV's engines do not perform as expected, and at upper-stage burnout the satellite

according to a factory cost ledger, job no 51 has incurred the following costs: direct material - 30

A process in the industry where a wholesaler needs an amount that is the difference among the manufacturer's price to the wholesaler and the contract price to the resale customer.

Shortflower Ltd currently publishes, prints and distributes a range of catalogues and instruction manuals. The management has now decided to discontinue printing and distribution a