Compute amount by which operating income would change

Assignment Help Accounting Basics

Reference no: EM131816374

Question: Special-Order Decision Belltown Athletic Supply (BAS) makes game jerseys for athletic teams. The F. C. Kitsap soccer club has offered to buy 100 jerseys for the teams in its league for $15 per jersey. The team price for such jerseys normally is $18, an 80% markup over BAS's purchase price of $10 per jersey. BAS adds a name and number to each jersey at a variable cost of $2 per jersey. The annual fixed cost of equipment used in the printing process is $6,000, and other fixed costs allocated to jerseys are $2,000. BAS makes about 2,000 jerseys per year, so the fixed cost is $4 per jersey. The equipment is used only for printing jerseys and stands idle 75% of the usable time. The manager of BAS turned down the offer, saying, "If we sell at $15 and our cost is $16, we lose money on each jersey we sell. We would like to help your league, but we can't afford to lose money on the sale."

1. Compute the amount by which the operating income of BAS would change if it accepted F. C. Kitsap's offer.

2. Suppose you were the manager of BAS. Would you accept the offer? In addition to considering the quantitative impact computed in requirement 1, list two qualitative considerations that would influence your decision-one qualitative factor supporting acceptance of the offer and one supporting rejection.

Reference no: EM131816374

Questions Cloud

What the employee makes posts on a personal facebook page : What if the employee makes posts on a personal facebook page that might reflect poorly on employer? Should the employee be held liable for such personal posts?

Boozy bees may offer clues about pickled people : "Boozy Bees May Offer Clues About Pickled People" describes a study in which bees were give various amounts of alcohol, while some bees were given plain

What career opportunities are available as a cma : What career opportunities are available as a CMA, What career opportunities are available as a CPA

What was the explanatory variable : a. Was this an observational study or an experiment? b. There are two variables of interest. What was the explanatory variable?

Compute amount by which operating income would change : Special-Order Decision Belltown Athletic Supply (BAS) makes game jerseys for athletic teams. The F. C. Kitsap soccer club has offered to buy 100 jerseys.

Create an argument to be presented to the cio the need : Create an argument to be presented to the CIO the need to integrate all clinical and administrative departments using a Health Information Management System.

Effect of consuming oatmeal on cholesterol : Suppose that the effect of consuming oatmeal on cholesterol level is thought to depend to some extent on two additional variables-gender and degree of fitness.

Determine the total two-year interest cost under each plan : Determine the total two-year interest cost under each plan.

Journalize the entry to apply factory overhead to production : The chief cost accountant for Mountain Glade Beverage Co. estimated that total factory overhead cost for the Blending Department for the coming fiscal year

User Account

All Pages