Alpena Corporation manufactures smartphone and tablet cases. The following is the cost of each unit. Materials Labor Variable overhead Fixed overhead ($1,605,000 per year; 150,000 units per year) Total $7.85 3.45 1.45 10.70 $23.45 Decatur Devices has approached Alpena with an offer to buy 3,000 cases at a price of $18.80 each for its new specialty tablet designed for health care workers. The regular price of an Alpena case is $31.50. Alpena has the total capacity to produce 180,000 units without increasing its fixed overhead. Decatur Devices requires that each case use its branding, which requires a more expensive embossing step. This will result in an additional $3.35 per case labor cost. The material cost of of the Decatur case will be the same as for the current models. The Decatur order will also require a one-time rental of embossing equipment for $4,509. Required: a. Prepare a schedule to show the impact of filling the Decatur Devices order on Alpena's profits for the year. b. Would you recommend that Alpena accept the order? c. Considering only profit, determine the minimum quantity of cases in the special order that would make it profitable, assuming capacity is available.
Alpena Corporation manufactures smartphone and tablet cases. The following is the cost of each unit. Materials Labor Variable overhead Fixed overhead ($1,605,000 per year; 150,000 units per year) Total $7.85 3.45 1.45 10.70 $23.45 Decatur Devices has approached Alpena with an offer to buy 3,000 cases at a price of $18.80 each for its new specialty tablet designed for health care workers. The regular price of an Alpena case is $31.50. Alpena has the total capacity to produce 180,000 units without increasing its fixed overhead. Decatur Devices requires that each case use its branding, which requires a more expensive embossing step. This will result in an additional $3.35 per case labor cost. The material cost of of the Decatur case will be the same as for the current models. The Decatur order will also require a one-time rental of embossing equipment for $4,509. Required: a. Prepare a schedule to show the impact of filling the Decatur Devices order on Alpena's profits for the year. b. Would you recommend that Alpena accept the order? c. Considering only profit, determine the minimum quantity of cases in the special order that would make it profitable, assuming capacity is available.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Required A Required B Required C
Prepare a schedule to show the impact of filling the Decatur Devices order on Alpena's profits
answers in thousands rounded to 1 decimal place. (i.e., 5,400,400 should be entered as 5,400
"lower", keeping Status Quo as the base. Select "none" if there is no effect.)
Sales revenue
Less variable costs:
Materials
Labor
Variable overhead
Total variable cost
Contribution margin
Less: Fixed costs
Operating profit (loss)
Status Quo
150,000 Units
$
Required A Required B Required C
(All Costs in Thousands of Dollars)
Alternative
153,000 Units
0.0 $
0.0
units
Difference
Considering only profit, determine the minimum quantity of cases in the special order that would make it profitable, assuming
capacity is available.
Quantity of cases
Transcribed Image Text:Alpena Corporation manufactures smartphone and tablet cases. The following is the cost of each unit.
$7.85
3.45
1.45
10.70
$ 23.45
Materials
Labor
Variable overhead
Fixed overhead ($1,605,000 per year; 150,000 units per year)
Total
Decatur Devices has approached Alpena with an offer to buy 3,000 cases at a price of $18.80 each for its new specialty tablet
designed for health care workers. The regular price of an Alpena case is $31.50. Alpena has the total capacity to produce 180,000
units without increasing its fixed overhead. Decatur Devices requires that each case use its branding, which requires a more expensive
embossing step. This will result in an additional $3.35 per case labor cost. The material cost of of the Decatur case will be the same as
for the current models. The Decatur order will also require a one-time rental of embossing equipment for $4,509.
Required:
a. Prepare a schedule to show the impact of filling the Decatur Devices order on Alpena's profits for the year.
b. Would you recommend that Alpena accept the order?
c. Considering only profit, determine the minimum quantity of cases in the special order that would make it profitable, assuming
capacity is available.
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