Special Order High-Low Cost Estimation safellide, Inc. produces air bag systems that it sells to North American automobile manufacturers. Although the company has a capacity of 300.000 units per year, it is currently producing at an annual rate of 180.000 units SaleRide, Inc. has received an order from a German manufacturer to purchase 60.000 units at $11.00 each. Budgeted costs for 180.000 and 240,000 units are as follows Manufacturing com Direct ma Develabor Sating and administrative fotal Costs per un Manufacturing Selvg and admirati 180,000 240,000 Units $450.000 $400,000 115,000 420,000 1215.000 120.000 1.380.000 22000 75.000 780,000 $2.745.000 1.000.000 $13.00 $5.50 425 $15.25 $12.79 Sales to North American manufacturers are priced at $23 per unit, but the sales manager believes the company should aggressively seek the German business even if it results in a loss of $1,75 per unit, She believes obtaining this order would open up several new markets for the company's product. The general manager commented that the company cannot tighten its belt to absorb the $105,000 loss ($1.75 60.0001 it would incur if the order is accepted (a) Determine the financial implications of accepting the order. (Hint: Use the high-low method to determine variable costs per una) Accepting the offer will increase profits by s
Special Order High-Low Cost Estimation safellide, Inc. produces air bag systems that it sells to North American automobile manufacturers. Although the company has a capacity of 300.000 units per year, it is currently producing at an annual rate of 180.000 units SaleRide, Inc. has received an order from a German manufacturer to purchase 60.000 units at $11.00 each. Budgeted costs for 180.000 and 240,000 units are as follows Manufacturing com Direct ma Develabor Sating and administrative fotal Costs per un Manufacturing Selvg and admirati 180,000 240,000 Units $450.000 $400,000 115,000 420,000 1215.000 120.000 1.380.000 22000 75.000 780,000 $2.745.000 1.000.000 $13.00 $5.50 425 $15.25 $12.79 Sales to North American manufacturers are priced at $23 per unit, but the sales manager believes the company should aggressively seek the German business even if it results in a loss of $1,75 per unit, She believes obtaining this order would open up several new markets for the company's product. The general manager commented that the company cannot tighten its belt to absorb the $105,000 loss ($1.75 60.0001 it would incur if the order is accepted (a) Determine the financial implications of accepting the order. (Hint: Use the high-low method to determine variable costs per una) Accepting the offer will increase profits by s
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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Transcribed Image Text:Special Order: High-Low Cost Estimation
safellide, Inc produces air bag systems that it sells to North American automobile manufacturers. Although the company has a capacity of 300.000 units per year, it is currently producing at an annual rate of
180.000 units SafeRide, Inc bus received an order from a Germans manufacturer to purchase 60,000 units at $11.00 each Budgeted costs for 180.000 and 240,000 units are as follows
Manufacturing co
Direct ma
Develabor
Factory overhead
Sating and administrative
Total
Costs per unt
Manufacturing
180,000 240,000
Units
$450.000
$400.000
115,000 420,000
1215.000 1.260.000
1.580.000 22000
75.000 780,000
$2.745.000 300.000
$11.00 $5.50
$15.25
Sales to North American manufacturers are priced at $23 per unit, but the sales manager believes the company should aggressively seek the German business even if it results in a loss of $1,75 per unit. She
believes obtaining this order would open up several new markets for the company's product. The general manager commented that the company cannot tighten its belt to absorb the $105,000 loss($1.75
60.0001 it would incur if the order is accepted
(a) Determine the financial implications of accepting the order. (Hint: Use the high-low method to determine variable costs per una)
Accepting the offer wit increase
profits by
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