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

Calculate the cumulative cash flows, Assume that you are the purchaser of t...

Assume that you are the purchaser of the building at the end of the construction period, and you have paid the developer an amount which gives you a 7% annual return on net revenue

Principles of marginal costing, Principles of Marginal Costing The pri...

Principles of Marginal Costing The principles of marginal costing are as given: 1. Period fixed costs are similar, for any volume of sales and production provided suc

Operating cycle of a merchandiser, Explain and illustrate with your own exa...

Explain and illustrate with your own example the operating cycle of a merchandiser.   Explain and  illustrate the differences between a multiple-step income statement and a single

Cost accounting, Cost Accounting Cost accounting has been defined via ...

Cost Accounting Cost accounting has been defined via many accounting scholars in different forums. There is no single watertight definition of cost accounting, however the var

Overapplied or underapplied overhead: manufacturer, Budgeted direct labour ...

Budgeted direct labour cost 75000 hours @ $16 per hour Budgeted manufacturing overhead 80 000 hours @ $17.50 per hour Actual direct labour cost $997 500 Budgeted manufa

Outstanding expenses, Expenses are usually recorded only while they are pai...

Expenses are usually recorded only while they are paid. The failure to record unpaid expenses in the accounts outcomes in an understatement of which expense and also an understatem

Income and expenditure account, The following is a summary of a cash book f...

The following is a summary of a cash book for the year ended 31 April 2012 Payments                              $              Receipts                                    $

Which of the four types of costs would include direct labor, Which of the f...

Which of the four types of costs would include Direct Labor? A. Unit-Level B. Batch-Level C. Product Sustaining D. None of the above

Answer, Chen Enterprises purchased 67,000 pounds (cost = $616,400) of direc...

Chen Enterprises purchased 67,000 pounds (cost = $616,400) of direct material to be used in the manufacture of the company''s only product.

Link between financial and cost books, Link between Financial and Cost Book...

Link between Financial and Cost Books The link among the two sets of books is achieved via operating a cost ledger control account and a financial ledger control account.  Cos

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