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

Sam Edwards has been the accounting manager for Jade Manufacturing in a highly competitive international market for ten years. Jade Manufacturing produces heavy equipment for two m

behavioral aspect of standard costing

allocate the overheads to the three departments and do the secondary allocation of service departments

A machine originally had an estimated useful life of 5 years, but after 3 complete years, it was decided that the original estimate of useful life should have been 10 years. At tha

The following information pertains to Tudor Logistics Company: 200X Information: Sales                                      $4,875,000 Selling expense

Stock control and its Level Management must formulate decisions regarding to the control of stock levels along with a view to minimizing the cost of the company whereas achie

Questions 8-10 rely on the following data. FrontGrade Systems allocates manufacturing over- head based on machine hours. Each connector should require 11 machine hours. According t

Hi, i need the solution manual for cost accounting managerial emphasis 12 edition