Costing term, Cost Accounting

Assignment Help:

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.


Related Discussions:- Costing term

Purpose of cost estimation, Purpose of Cost Estimation In estimating i...

Purpose of Cost Estimation In estimating it assists the future expenditure as cost prediction like the expenditure will depend upon the cost of the respective activities a)

Determine the depletion cost per board foot, Conan O'Brien Logging and Lumb...

Conan O'Brien Logging and Lumber Company owns 3,300 acres of timberland on the north side of Mount Leno, which was purchased in 2000 at a cost of $650 per acre. In 2012, O'Brien be

Overhead analysis, allocate the overheads to the three departments and do t...

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

Analyse the data and prepare a report, The data set for the assignment is a...

The data set for the assignment is about breast cancer.  Some of these data have been changed for the purposes of this assignment so the results from the analysis of this file may

How much will alan save or lose, Hale Company makes sets of wrenches. They ...

Hale Company makes sets of wrenches. They are trying to decide whether to continue to make the case the wrenches are sold in, or to outsource it to another company. The direct mate

Typical causes of material variances, Typical Causes of Material Va...

Typical Causes of Material Variances Price Variances a) Paying lower or higher prices than planned. b) Losing or gaining quantity discounts via buying in large

Factors affect decision making, Factors affect Decision Making These d...

Factors affect Decision Making These decisions need consideration of factors as like A. The level of market possible to be available in future B. The strategy that compe

Compute cost, Your company completed the East Side subdivision. The costs a...

Your company completed the East Side subdivision. The costs are shown in Figure 11-4. The site concrete labor and outside lighting were done by subcontractors. The grading and exca

Write Your Message!

Captcha
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