Should the company take this special order

Assignment Help Finance Basics

Reference no: EM131015159

ABC Electronics manufactures Blue-Ray drive, which has a fixed manufacturing overhead budget for year 20X3 of $2,000,000. The sales of Blue-Ray drive are expected to be 500,000 units for the year. All variable manufacturing costs are expected to be $8 per unit. The company has budgeted $5,000,000 for selling and administrative expenses and of which, 40% of them are variable expenses. The sale price of the Blue-Ray drive will be $30 each.

(1) Prepare a budgeted income statement for the year in contribution form ignoring income taxes.

(2) If a computer manufacturer offers to buy 200,000 units of Blue-Ray drive for $2 million on a one-time special order. Assume that ABC Electronics has enough manufacturing capacity for the order and there will be no selling and administrative cost incurred. However, a special commission of 5% of the sales of this special order will apply. Should the company take this special order?

(3) For the special order in (2), if ABC Electronics only has extra capacity of 100,000 units and the additional 100,000 units need to be subcontracted for $15 each, should the company take this special order?

(4) For the special order in (3), what is the highest subcontract price that the company can accept so that the company will not lose money on this special order?

Reference no: EM131015159

Questions Cloud

Calculate the internal rate of return and profitability : Calculate the internal rate of return and profitability index for the proposed investment. What do these two measures tell you about the project's viability?

Express given integral as an iterated integral in variable u : Using the transformation of coordinates x = (3/8)u - (1/8)v and y =-(1/8)u + (3/8)v, express the integral ∫∫D(24x + 8y )dx dy as an iterated integral in the variables u and v. Do not evaluate the integral.

Conduct an internal and external environmental analysis : Create a SWOT table summarizing your findings. Your environmental analysis should consider, at a minimum, the following factors.

Display the color graph of the monastery liking network : Display the color graph of the monastery liking network in which you modified the nodes to indicate the novice monks' attributes. Describe what you observe

Should the company take this special order : If a computer manufacturer offers to buy 200,000 units of Blue-Ray drive for $2 million on a one-time special order. Assume that ABC Electronics has enough manufacturing capacity for the order and there will be no selling and administrative cost ..

Approximate the distribution of the data : The data here are counts, so they are discrete, however, one might try to approximate the distribution with a continuous distribution. What distribution(s) might approximate the distribution of the data? What distribution(s) would not approximate..

What conclusions are evident from your trend analysis : What conclusions are evident from your trend analysis? Justify your answers and explain how these findings might be relevant to the investor and the management of the company.

Practical information regarding the vendors : Is a sample of size 10 large enough to provide any practical information regarding the vendors supposed process improvement?

Estimate the probability of making : Suppose that one was unsure about the 0.1 probability given above and want to estimate the probability of making an A. If a random sample of 30 students resulted in six who made A, what would you estimate the probability of making an A to be?

User Account

All Pages