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

Master budget framework, Master Budget Framework The master budget is ...

Master Budget Framework The master budget is the overall quantifications of the budgeting plan. In this, functional budgets are not corporate. A functional budget is a budget

Case study, Ask q6) The Net Sales revenue reported is derived from the sale...

Ask q6) The Net Sales revenue reported is derived from the sale of products. Each year Findley records from cash sells, sells on account and completed purchase orders. During 2016

Process costing, If question (CA IPCC) is silent which method to follow: av...

If question (CA IPCC) is silent which method to follow: avg cost or fifo or lifo?

Evaluate the expected earning, During his career in the energy industry, T-...

During his career in the energy industry, T-Bone McAdams has accumulated $5,000,000 in "surplus savings" that he is planning to donate to his college alma mater, Oklahoma A&M, in

Capital expenditure budget, Capital Expenditure Budget This represent...

Capital Expenditure Budget This represents the expenditure on all fixed assets throughout the budget period.  Addition intended to profit future accounting periods, or expend

What is the marginal cost, Marginal Cost (MC): The marginal cost of an a...

Marginal Cost (MC): The marginal cost of an additional unit of output is the cost of the additional inputs required to make that output. More formally, the marginal cost is the

Computerized packages, types of computerized packages .its cost .features s...

types of computerized packages .its cost .features size of the business is intended to service

Considerations in variance investigation, Considerations in Variance Invest...

Considerations in Variance Investigation As already notice above, not all variances are investigated; this is only the material and meaningful as for cost control reasons vari

What is the margin of safety, Apollo Company manufactures a single product ...

Apollo Company manufactures a single product that sells for $168 per unit and whose total variable costs are $126 per unit. The company's annual fixed costs are $630,000. (1) Use t

Evaluate the cost structure, The project (using the tools and techniques gi...

The project (using the tools and techniques given in Chapters 3, 8, 10, 11, and 12 of the textbook) and its subsequent report are based on the complete economic analysis of a compa

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