Please correct answer Harrison Ford Company has been approached by a new customer with anoffer to purchase 10,000 units of its model IJ4 at a price of $3.90 each. Thenew customer is geographically separated from the company's othercustomers, and existing sales would not be affected. Harrison normallyproduces 75,000 units of IJ4 per year but only plans to produce and sell60,000 in the coming year. The normal sales price is 412 per unit. Unit costinformation for the normal level activity is as follows:Direct materials$1.752.50Direct laborVariable overhead 1.50Fixed overheadTotal3.259.00a) Should the company accept or reject the special order?b) By how much will operating income increase or decrease if the order isaccepted?

Step 1: Introduction to the Operating Income:The monetary advantage that arises to a business entity…

Answered: Harrison Ford Company has been…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

The Cool Can Company manufactures drink koozies and has been approached by a new customer with an offer to purchase 15,000 units at a per-unit price of $7.00. The new customer is geographically separated from Cool Can's other customers, and existing sales will not be affected. Cool Can normally produces 95,000 units but plans to produce and sell only 65,000 in the coming year. The normal sale price is $16 per unit. Unit cost information is as follows: Direct materials Direct labor Variable overhead Fixed overhead. Total In addition, assume that the new customer also wants to have its company logo affixed to each koozie using a label. Cool Can would have to purchase a special logo labeling machine that will cost $12,000 The machine will be able to label the 15,000 units and then it will be scrapped (with no further value). No other fixed overhead activities will be incurred. In addition, each special logo requires additional direct materials of $0.20 $3.10 2.50 1.15 1.00 $8.55…
RG Motors has been approached by a new customer with an offer to purchase 5,000 units of its hand-free, Wi-Fi-enabled automotive model – the SMART, at a price of RM18,000 per automobile. RG’s other sales would not be affected by this new customer offer. RG normally produces 100,000 units of its SMART model per year but only plans to produce and sell 90,000 units in the coming year. The normal sales price is RM35,000 per SMART. Unit cost information for the normal level of activity is as follows: Total CostDirect materials 10,000Direct labor 2,000Variable overhead 4,000Fixed overhead 8,000Total 24,000 Fixed overhead will not be affected by whether or not the special order is accepted. requird (i) List the relevant costs and benefits of the two alternatives of the special order. (ii) Propose whether operating income increase or decrease if the order is accepted with calculation details.
RG Motors has been approached by a new customer with an offer to purchase 5,000 units of its hand-free, Wi-Fi-enabled automotive model – the SMART, at a price of RM18,000 per automobile. RG’s other sales would not be affected by this new customer offer. RG normally produces 100,000 units of its SMART model per year but only plans to produce and sell 90,000 units in the coming year. The normal sales price is RM35,000 per SMART. Unit cost information for the normal level of activity is as follows: Table 7: Production Costs Total Cost RM Direct materials 10,000 Direct labor 2,000 Variable overhead 4,000 Fixed overhead 8,000 Total 24,000 Fixed overhead will not be affected by whether or not the special order is accepted. Required: (i) List the relevant costs and benefits of the two alternatives of the special order. (ii) Propose whether operating income increase or decrease if the order is accepted with calculation details.
The Cool Can Company manufactures drink koozies and has been approached by a new customer with an offer to purchase 15,000 units at a per-unit price of $7.00. The new customer is geographically separated from Cool Can's other customers, and existing sales will not be affected. Cool Can normally produces 82,000 units but plans to produce and sell only 65,000 in the coming year. The normal sales price is $12 per unit. Unit cost information is as follows: Direct materials Direct labor Variable overhead Fixed overhead Total $3.10 1.50 1.00 1.80 $7.40 If Cool Can accepts the order, no fixed manufacturing activities will be affected because there is sufficient excess capacity. Required: Download Excel spreadsheet 1. What are the alternatives for Cool Can? 2. Conceptual Connection: Should Cool Can accept the special order? By how much will operating income increase or decrease if the order is accepted? 3. Conceptual Connection: Briefly explain the significance of the statement in the exercise…
The Cool Can Company manufactures drink koozies and has been approached by a new customer with an offer to purchase 15,000 units at a per-unit price of $7.00. The new customer is geographically separated from Cool Can's other customers, and existing sales will not be affected. Cool Can normally produces 82,000 units but plans to produce and sell only 65,000 in the coming year. The normal sales price is $12 per unit. Unit cost information is as follows: Direct materials $3.10 Direct labor Variable overhead Fixed overhead Total 1.50 1.00 1.80 $7.40 However, assume that Cool Can plans to produce and sell 70,000 units in the coming year (rather than the originally anticipated 65,000 units). Required: 1. Using Excel (or some other spreadsheet software tool), calculate the amount by which total operating income increases or decreases if the order is accepted. Decrease -84,000 X 2. Conceptual Connection: Should Cool Can accept the special order when sales at the regular price are expected to…
Assume again that Andretti Company has sufficient capacity to produce 123,200 Daks each year. A customer in a foreign market wants to purchase 35,200 Daks. If Andretti accepts this order it would have to pay import duties on the Daks of $2.70 per unit and an additional $28,160 for permits and licenses. The only selling costs that would be associated with the order would be $1.60 per unit shipping cost. What is the break-even price per unit on this order? (Round your answers to 2 decimal places.)
B. Smash Company manufactures professional paperweights and has been approached by a new customer with an offer to purchase 15,000 units at a per-unit price of P7.00.The new customer is geographically separated from Smash’s other customers, and existing sales will not be affected. Smash normally produces 82,000 units but plans to produce and sell only 65,000 units in the coming year. The normal sales price is P12.00 per unit. Unit cost information is as follows: Direct materials P 3.10 Direct labor 2.25 Variable overhead 1.15 Fixed overhead 1.80 Total P` 8.30 If Smash accepts the order, no fixed manufacturing activities will be affected because there…
Melrose can sell 68,000 units of Product C to regular customers next year. If Moore Company offers to buy the special order units at P95 per unit, the effect of accepting the special order for 7,000 units on Melrose's net operating income for next year will be a: The Melrose Company produces a single product, Product C. Melrose has the capacity to produce 70,000 units of Product C each year. If Melrose produces at capacity, the per unit costs to produce and sell one unit of Product C are as follows: Direct materials P20 Direct labor P17 Variable manufacturing overhead Fixed manufacturing overhead Variable selling expense | Fixed selling expense P13 P14 P12 P8 The regular selling price of one unit of Product C is P100. A special order has been received by Melrose from Moore Company to purchase 7,000 units of Product C during the upcoming year. If this special order is accepted, the variable selling expense will be reduced by 75%. Total fixed manufacturing overhead and fixed selling…
Assume that Cane expects to produce and sell 80,000 Alphas during the current year. One of Cane’ssales representatives has found a new customer who is willing to buy 10,000 additional Alphas for aprice of $80 per unit. What is the financial advantage (disadvantage) of accepting the new customer’sorder?
Assume that a merchandiser purchases a product from a supplier for $3.00 per unit and then sells it to customers for $5.00 per unit. Ordinarily, the company sell 30,000 units per year; however, it is considering lowering its price to $4.50 per unit. At the lower price, the company expects to sell 49,250 units per year. What total contribution margin will the company earn if it sells 49,250 units at a price of $4.50 per unit? Multiple Choice $69,400 $73,875 $64,025 $83,725
Please provide Solutions
Hyperion Inc., currently sells its latest high-speed colour printer, the Hyper 500, for $354. Its cost of goods sold for the Hyper 500 is $202 per unit, and this year's sales (at the current price of $354) are expected to be 24,000 units. Hyperion plans to lower the price of the Hyper 500 to $303 one year from now. a. Suppose Hyperion considers dropping the price to $303 immediately, (rather than waiting one year). By doing so it expects to increase this year's sales by 30% to 31,200 units. What would be the incremental impact on this year's EBIT of such a price drop? b. Suppose that for each printer sold, Hyperion expects additional sales of $82 per year on ink cartridges for the three-year life of the printer, and Hyperion has a gross profit margin of 61% on ink cartridges. What is the incremental impact on EBIT for the next three years of dropping the price immediately (rather than waiting one year)? a. Suppose Hyperion considers dropping the price to $303 immediately, (rather than…

SEE MORE QUESTIONS

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS