Shanghai Exports, LTD produces wall mounts for flat panel television sets. The forecasted income statement for 2014 is as follows: Shanghai Exports, LTD Budgeted Income Statement For the Year 2014 Sales ($ 44 per unit) $ 4,400,000 Cost of good sold ($ 32 per unit) (3,200,000) Gross profit 1,200,000 Selling expenses ($ 3 per unit) (300,000) Net income $ 900,000 Additional Information (1) Of the production costs and selling expenses, $800,000 and $100,000, respectively, are fixed. (2) Shanghai Exports, LTD received a special order from a hospital supply company offering to buy 12,500 wall mounts for $30. If it accepts the order, there will be no additional selling expenses, and there is currently sufficient excess capacity to fill the order. The company's sales manager argues for rejecting the order because "we are not in the business of paying $32 to make a product to sell for $30." Do you think the company should accept the special order? Compute the contribution per unit and total contribution for the special order. Contribution per unit. Note: Round answer to two decimal places. Total contribution $ 0

Shanghai Exports, LTD produces wall mounts for flat panel television sets. The forecasted income statement for 2014 is as follows: Shanghai Exports, LTD Budgeted Income Statement For the Year 2014 Sales ($ 44 per unit) $ 4,400,000 Cost of good sold ($ 32 per unit) (3,200,000) Gross profit 1,200,000 Selling expenses ($ 3 per unit) (300,000) Net income $ 900,000 Additional Information (1) Of the production costs and selling expenses, $800,000 and $100,000, respectively, are fixed. (2) Shanghai Exports, LTD received a special order from a hospital supply company offering to buy 12,500 wall mounts for $30. If it accepts the order, there will be no additional selling expenses, and there is currently sufficient excess capacity to fill the order. The company's sales manager argues for rejecting the order because "we are not in the business of paying $32 to make a product to sell for $30." Do you think the company should accept the special order? Compute the contribution per unit and total contribution for the special order. Contribution per unit. Note: Round answer to two decimal places. Total contribution $ 0

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.

Question

**Shanghai Exports, LTD - Budgeted Income Statement for 2014**

- **Sales ($44 per unit):** $4,400,000
- **Cost of goods sold ($32 per unit):** $3,200,000
- **Gross profit:** $1,200,000
- **Selling expenses ($3 per unit):** $300,000
- **Net income:** $900,000

**Additional Information:**

1. Of the production costs and selling expenses, $800,000 and $100,000 respectively, are fixed.
2. Shanghai Exports, LTD received a special order from a hospital supply company offering to buy 12,500 wall mounts for $30 each. If the order is accepted, there will be no additional selling expenses, and there is currently sufficient excess capacity to fill the order. The company's sales manager argues against the order, stating, "we are not in the business of paying $32 to make a product to sell for $30."

**Discussion Points:**

- **Should the company accept the special order?**
- **Compute the contribution per unit and the total contribution for the special order.**

*Note:* Contribution per unit should be rounded to two decimal places.

**Contribute Input Fields:**

- Contribution per unit: $[Input Box]
- Total contribution: $0 [Initial Value, Adjust after calculation]

**Button:**

- [Check]

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