Rundle Corporation makes and sells state-of-the-art electronics products. One of its segments produces The Math Machine, an inexpensive calculator. The company's chief accountant recently prepared the following income statement showing annual revenues and expenses associated with the segment's operating activities. The relevant range for the production and sale of the calculators is between 32,000 and 72,000 units per year. Revenue (35,000 units x $12.00) Unit-level variable costs Materials cost (35,000 x $3.00) Labor cost (35,000 x $2.00) Manufacturing overhead (35,000 x $0.20) Shipping and handling (35,000 x $0.28) Sales commissions (35,000 × $2.00) Contribution margin Fixed expenses Advertising costs Salary of production supervisor Allocated companywide facility-level expenses Net loss Required $ 420,000 (105,000) (70,000) (7,000) (9,800) (70,000) 158,200 (27,000) (67,000) (83,000) $ (18,800) a. A large discount store has approached the owner of Rundle about buying 6,000 calculators. It would replace The Math Machine's label with its own logo to avoid affecting Rundle's existing customers. Because the offer was made directly to the owner, no sales commissions on the transaction would be involved, but the discount store is willing to pay only $5.70 per calculator. Calculate the contribution margin from the special order. Based on quantitative factors alone, should Rundle accept the special order? b-1. Rundle has an opportunity to buy the 35,000 calculators it currently makes from a reliable competing manufacturer for $6.40 each. The product meets Rundle's quality standards. Rundle could continue to use its own logo, advertising program, and sales force to distribute the products. Calculate the total cost for Rundle to make and buy the 35,000 calculators. b-2. Should Rundle buy the calculators or continue to make them? b-3. Should Rundle buy the calculators or continue to make them, if the volume of sales were increased to 72,000 units? c. Because the calculator division is currently operating at a loss, should it be eliminated from the company's operations? Support your answer with appropriate computations. Specifically, by what amount would the segment's elimination increase or decrease profitability? > Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req A Req B1 Req B2 Req B3 Req C Rundle has an opportunity to buy the 35,000 calculators it currently makes from a reliable competing manufacturer for $6.40 each. The product meets Rundle's quality standards. Rundle could continue to use its own logo, advertising program, and sales force to distribute the products. Calculate the total cost for Rundle to make and buy the 35,000 calculators. Make Total relevant cost $ 261,800 $ Buy 224,000 < Req A Req B2 >

Rundle Corporation makes and sells state-of-the-art electronics products. One of its segments produces The Math Machine, an inexpensive calculator. The company's chief accountant recently prepared the following income statement showing annual revenues and expenses associated with the segment's operating activities. The relevant range for the production and sale of the calculators is between 32,000 and 72,000 units per year. Revenue (35,000 units x $12.00) Unit-level variable costs Materials cost (35,000 x $3.00) Labor cost (35,000 x $2.00) Manufacturing overhead (35,000 x $0.20) Shipping and handling (35,000 x $0.28) Sales commissions (35,000 × $2.00) Contribution margin Fixed expenses Advertising costs Salary of production supervisor Allocated companywide facility-level expenses Net loss Required $ 420,000 (105,000) (70,000) (7,000) (9,800) (70,000) 158,200 (27,000) (67,000) (83,000) $ (18,800) a. A large discount store has approached the owner of Rundle about buying 6,000 calculators. It would replace The Math Machine's label with its own logo to avoid affecting Rundle's existing customers. Because the offer was made directly to the owner, no sales commissions on the transaction would be involved, but the discount store is willing to pay only $5.70 per calculator. Calculate the contribution margin from the special order. Based on quantitative factors alone, should Rundle accept the special order? b-1. Rundle has an opportunity to buy the 35,000 calculators it currently makes from a reliable competing manufacturer for $6.40 each. The product meets Rundle's quality standards. Rundle could continue to use its own logo, advertising program, and sales force to distribute the products. Calculate the total cost for Rundle to make and buy the 35,000 calculators. b-2. Should Rundle buy the calculators or continue to make them? b-3. Should Rundle buy the calculators or continue to make them, if the volume of sales were increased to 72,000 units? c. Because the calculator division is currently operating at a loss, should it be eliminated from the company's operations? Support your answer with appropriate computations. Specifically, by what amount would the segment's elimination increase or decrease profitability? > Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req A Req B1 Req B2 Req B3 Req C Rundle has an opportunity to buy the 35,000 calculators it currently makes from a reliable competing manufacturer for $6.40 each. The product meets Rundle's quality standards. Rundle could continue to use its own logo, advertising program, and sales force to distribute the products. Calculate the total cost for Rundle to make and buy the 35,000 calculators. Make Total relevant cost $ 261,800 $ Buy 224,000 < Req A Req B2 >

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Transcribed Image Text:Rundle Corporation makes and sells state-of-the-art electronics products. One of its segments produces The Math Machine, an inexpensive calculator. The company's chief accountant recently prepared the following income statement showing annual revenues and expenses associated with the segment's operating activities. The relevant range for the production and sale of the calculators is between 32,000 and 72,000 units per year. Revenue (35,000 units x $12.00) Unit-level variable costs Materials cost (35,000 x $3.00) Labor cost (35,000 x $2.00) Manufacturing overhead (35,000 x $0.20) Shipping and handling (35,000 x $0.28) Sales commissions (35,000 × $2.00) Contribution margin Fixed expenses Advertising costs Salary of production supervisor Allocated companywide facility-level expenses Net loss Required $ 420,000 (105,000) (70,000) (7,000) (9,800) (70,000) 158,200 (27,000) (67,000) (83,000) $ (18,800) a. A large discount store has approached the owner of Rundle about buying 6,000 calculators. It would replace The Math Machine's label with its own logo to avoid affecting Rundle's existing customers. Because the offer was made directly to the owner, no sales commissions on the transaction would be involved, but the discount store is willing to pay only $5.70 per calculator. Calculate the contribution margin from the special order. Based on quantitative factors alone, should Rundle accept the special order? b-1. Rundle has an opportunity to buy the 35,000 calculators it currently makes from a reliable competing manufacturer for $6.40 each. The product meets Rundle's quality standards. Rundle could continue to use its own logo, advertising program, and sales force to distribute the products. Calculate the total cost for Rundle to make and buy the 35,000 calculators. b-2. Should Rundle buy the calculators or continue to make them? b-3. Should Rundle buy the calculators or continue to make them, if the volume of sales were increased to 72,000 units? c. Because the calculator division is currently operating at a loss, should it be eliminated from the company's operations? Support your answer with appropriate computations. Specifically, by what amount would the segment's elimination increase or decrease profitability? > Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req A Req B1 Req B2 Req B3 Req C Rundle has an opportunity to buy the 35,000 calculators it currently makes from a reliable competing manufacturer for $6.40 each. The product meets Rundle's quality standards. Rundle could continue to use its own logo, advertising program, and sales force to distribute the products. Calculate the total cost for Rundle to make and buy the 35,000 calculators. Make Total relevant cost $ 261,800 $ Buy 224,000 < Req A Req B2 >

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