Exercise 4-27 (Algo) Special Orders (LO 4-1, 2)Nardin Outfitters has a capacity to produce 16,500 of their special arctic tents per year. The company is currently producing and selling5,000 tents per year at a selling price of $1,350 per tent. The cost of producing and selling one tent follows:Variable manufacturing costsFixed manufacturing costsVariable selling and administrative costsFixed selling and administrative costsTotal costsSelling price per caseVariable manufacturing costsThe company has received a special order for 1.400 tents at a price of $690 per tent from Chipman Outdoor Center. It will not have topay any sales commission on the special order, so the variable selling and administrative costs would be only $54 per tent. The specialorder would have no effect on total fixed costs. The company has rejected the offer based on the following computations:Fixed manufacturing costsVariable sellingive costsFixed selling and administrative costsNet profit (loss) per caseRequired ARequired:a. What is the impact on profit for the year if Nardin Outfitters accepts the special order?b. Do you agree with the decision to reject the special order?Required BSales revenueVariable costs:$ 53013512595ManufacturingSelling and administrativeContribution margincostsOperating profit$ 885What is the impact on profit for the year if Nardin Outfitters accepts the special order? (Enter your answers in thousandsrounded to 1 decimal place. (i.e., 5,400,400 should be entered as 5,400.4). Select option "higher" or "lower", keeping StatusQuo as the base. Select "none" if there is no effect.)$$$ 6905301355495$ (124)(All revenues and costs in $000)Status QuoAlternative6400 Units5000 UnitsS2,650,000.0625,000.03,475,000.0 S1,150,000.02,325,000.0 S< Required A7,716,000.03,392,000.0758,000.02,634,000.01,150,000.01,484,000.0DifferenceRequired B >higherhigherhigherhigherhigherhigherC

The differential analysis is performed to compare the different alternatives available to the…

Answered: Nardin Outfitters has a capacity to…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 6MC: Jansen Crafters has the capacity to produce 50,000 oak shelves per year and is currently selling...

See similar textbooks

Similar questions

Jansen Crafters has the capacity to produce 50,000 oak shelves per year and is currently selling 44,000 shelves for $32 each. Cutrate Furniture approached Jansen about buying 1,200 shelves for bookcases it is building and is willing to pay $26 for each shelf. No packaging will be required for the bulk order. Jansen usually packages shelves for Home Depot at a price of $1.50 per shell. The $1.50 per-shelf cost is included in the unit variable cost of $27, with annual fixed costs of $320.000. However, the $130 packaging cost will not apply in this case. The fixed costs will be unaffected by the special order and the company has the capacity to accept the order. Based on this information, what would be the profit if Jansen accepts the special order? A. Profits will decrease by $1,200. B. Profits will increase by $31,200. C. Profits will increase by $600. D. Profits will increase by $7,200.
Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all 30,000 for $240 each. Country Enterprises has approached Dimitri to buy 800 chairs for $210 each. Dimitris normal variable cost is $165 per chair, including $50 per unit in direct labor per chair. Dimitri can produce the special order on an overtime shift, which means that direct labor would be paid overtime at 150% of the normal pay rate. The annual fixed costs will be unaffected by the special order and the contract will not disrupt any of Dimitris other operations. What will be the impact on profits of accepting the order?
Reubens Deli currently makes rolls for deli sandwiches it produces. It uses 30,000 rolls annually in the production of deli sandwiches. The costs to make the rolls are: A potential supplier has offered to sell Reuben the rolls for $0.90 each. If the rolls are purchased, 30% of the fixed overhead could be avoided, If Reuben accepts the offer, what will the effect on profit be?
Polaris Inc. manufactures two types of metal stampings for the automobile industry: door handles and trim kits. Fixed cost equals 146,000. Each door handle sells for 12 and has variable cost of 9; each trim kit sells for 8 and has variable cost of 5. Required: 1. What are the contribution margin per unit and the contribution margin ratio for door handles and for trim kits? 2. If Polaris sells 20,000 door handles and 40,000 trim kits, what is the operating income? 3. How many door handles and how many trim kits must be sold for Polaris to break even? 4. CONCEPTUAL CONNECTION Assume that Polaris has the opportunity to rearrange its plant to produce only trim kits. If this is done, fixed costs will decrease by 35,000, and 70,000 trim kits can be produced and sold. Is this a good idea? Explain.
Hatch Manufacturing produces multiple machine parts. The theoretical cycle time for one of its products is 65 minutes per unit. The budgeted conversion costs for the manufacturing cell dedicated to the product are 12,960,000 per year. The total labor minutes available are 1,440,000. During the year, the cell was able to produce 0.6 units of the product per hour. Suppose also that production incentives exist to minimize unit product costs. Required: 1. Compute the theoretical conversion cost per unit. 2. Compute the applied conversion cost per minute (the amount of conversion cost actually assigned to the product). 3. Discuss how this approach to assigning conversion cost can improve delivery time performance. Explain how conversion cost acts as a performance driver for on-time deliveries.
Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The cost of placing an order is 30. The cost of holding one unit of inventory for one year is 15.00. Currently, Ottis places 160 orders of 4,000 plastic housing units per year. Required: 1. Compute the economic order quantity. 2. Compute the ordering, carrying, and total costs for the EOQ. 3. How much money does using the EOQ policy save the company over the policy of purchasing 4,000 plastic housing units per order?
Zena Technology sells arc computer printers for $55 per unit. Unit product costs are: A special order to purchase 15,000 arc printers has recently been received from another company and Zena has idle capacity to fill the order. Zena will incur an additional $2 per printer for additional labor costs due to a slight modification the buyer wants made to the original product. One-third of the manufacturing overhead costs is fixed and will be incurred no matter how many units are produced. When negotiating the price, what is the minimum selling price that Zena should accept for this special order?
Basu Company produces two types of sleds for playing in the snow: basic sled and aerosled. The projected income for the coming year, segmented by product line, follows: The selling prices are 30 for the basic sled and 60 for the aerosled. (Round break-even packages and break-even units to the nearest whole unit.) Required: 1. Compute the number of units of each product that must be sold for Basu to break even. 2. Assume that the marketing manager changes the sales mix of the two products so that the ratio is five basic sleds to three aerosleds. Repeat Requirement 1. 3. CONCEPTUAL CONNECTION Refer to the original data. Suppose that Basu can increase the sales of aerosleds with increased advertising. The extra advertising would cost an additional 195,000, and some of the potential purchasers of basic sleds would switch to aerosleds. In total, sales of aerosleds would increase by 12,000 units, and sales of basic sleds would decrease by 5,000 units. Would Basu be better off with this strategy?
Power Corp. makes 2 products: blades for table saws and blades for handsaws. Each product passes through the sharpening machine area, which is the chief constraint during production. Handsaw blades take 15 minutes on the sharpening machine and have a contribution margin per blade of $15. Table saw blades take 20 minutes on the sharpening machine and have a contribution margin per blade of $35. If it is assumed that Power Corp. has 5,000 hours available on the sharpening machine to service a minimum demand for each product of 4,000 units, how much will profits increase if 200 more hours of machine time can be obtained?
Power Corp. makes 2 products: blades for table saws and blades for handsaws. Each product passes through the sharpening machine area, which is the chief constraint during production. Handsaw blades take 15 minutes on the sharpening machine and have a contribution margin per blade of $15. Table saw blades take 20 minutes on the sharpening machine and have a contribution margin per blade of $35. If it is assumed that Power Corp. has 5,000 hours available on the sharpening machine to service a minimum demand for each product of 4,000 units, how many of each product should be made?
Gent Designs requires three units of part A for every unit of Al that it produces. Currently, part A is made by Gent, with these per-unit costs in a month when 4.000 units were produced: Variable manufacturing overhead is applied at $1.00 per unit. The other $0.30 of overhead consists of allocated fixed costs. Gent will need 6,000 units of part A for the next years production. Cory Corporation has offered to supply 6,000 units of part A at a price of $7.00 per unit. It Gent accepts the offer, all of the variable costs and $1,200 of the fixed costs will be avoided. Should Gent Designs accept the offer from Cory Corporation?
Vandenberg, Inc., produces and sells two products: a ceiling fan and a table fan. Vandenberg plans to sell 40,000 ceiling fans and 70,000 table fans in the coming year. Product price and cost information includes: Ceiling Fan Table Fan Price $56 $17 Unit variable cost $13 $8 Direct fixed cost $21,200 $43,000 Common fixed selling and administrative expenses total $98,000. Required: Question Content Area 1. What is the sales mix estimated for next year (calculated to the lowest whole number for each product)?Sales mix of ceiling fans to table fans = ___________ : ______________ 2. Using the sales mix from Requirement 1, form a package of ceiling fans and table fans. How many ceiling fans and table fans are sold at break-even? Round your intermediate calculations and final answers to the nearest whole number. Break-even ceiling fans _______ Break-even table fans ______ 3. Prepare a contribution-margin-based income…

SEE MORE QUESTIONS

Recommended textbooks for you

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

Managerial Accounting: The Cornerstone of Busines…

Accounting

ISBN:

9781337115773

Author:

Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:

Cengage Learning

Cornerstones of Cost Management (Cornerstones Ser…

Accounting

ISBN:

9781305970663

Author:

Don R. Hansen, Maryanne M. Mowen

Publisher:

Cengage Learning

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

Managerial Accounting: The Cornerstone of Busines…

Accounting

ISBN:

9781337115773

Author:

Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:

Cengage Learning

Cornerstones of Cost Management (Cornerstones Ser…

Accounting

ISBN:

9781305970663

Author:

Don R. Hansen, Maryanne M. Mowen

Publisher:

Cengage Learning

SEE MORE TEXTBOOKS