Stavos Company's Screen Division manufactures a standard screen for high-definition televisions (HDTVs). The cost per screen is: Variable cost per screen $ 119 Fixed cost per screen 32* Total cost per screen $ 151 *Based on a capacity of 800,000 screens per year. Part of the Screen Division's output is sold to outside manufacturers of HDTVs and part is sold to Stavos Company's Quark Division, which produces an HDTV under its own name. The Screen Division charges $192 per screen for all sales. The net operating income associated with the Quark Division's HDTV is computed as follows: Selling price per unit $ 579 Variable cost per unit: Cost of the screen $ 192 Variable cost of electronic parts 240 Total variable cost 432 Contribution margin 147 Fixed costs per unit 81* Net operating income per unit $ 66 *Based on a capacity of 180,000 units per year. The Quark Division has an order from an overseas source for 4,800 HDTVs. The overseas source wants to pay only $410 per unit. Required: Assume the Quark Division has enough idle capacity to fill the 4,800 - unit order. Is the division likely to accept the $410 price or to reject it? Assume both the Screen Division and the Quark Division have idle capacity. Under these conditions, what is the financial advantage (disadvantage) for the company as a whole (on a per unit basis) if the Quark Division rejects the $410 price? Assume the Quark Division has idle capacity but the Screen Division is operating at capacity and could sell all of its screens to outside manufacturers. Under these conditions, what is the financial advantage (disadvantage) for the company as a whole (on a per unit basis) if the Quark Division accepts the $410 unit price?
Stavos Company's Screen Division manufactures a standard screen for high-definition televisions (HDTVs). The cost per screen is: Variable cost per screen $ 119 Fixed cost per screen 32* Total cost per screen $ 151 *Based on a capacity of 800,000 screens per year. Part of the Screen Division's output is sold to outside manufacturers of HDTVs and part is sold to Stavos Company's Quark Division, which produces an HDTV under its own name. The Screen Division charges $192 per screen for all sales. The net operating income associated with the Quark Division's HDTV is computed as follows: Selling price per unit $ 579 Variable cost per unit: Cost of the screen $ 192 Variable cost of electronic parts 240 Total variable cost 432 Contribution margin 147 Fixed costs per unit 81* Net operating income per unit $ 66 *Based on a capacity of 180,000 units per year. The Quark Division has an order from an overseas source for 4,800 HDTVs. The overseas source wants to pay only $410 per unit. Required: Assume the Quark Division has enough idle capacity to fill the 4,800 - unit order. Is the division likely to accept the $410 price or to reject it? Assume both the Screen Division and the Quark Division have idle capacity. Under these conditions, what is the financial advantage (disadvantage) for the company as a whole (on a per unit basis) if the Quark Division rejects the $410 price? Assume the Quark Division has idle capacity but the Screen Division is operating at capacity and could sell all of its screens to outside manufacturers. Under these conditions, what is the financial advantage (disadvantage) for the company as a whole (on a per unit basis) if the Quark Division accepts the $410 unit price?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Stavos Company's Screen Division manufactures a standard screen for high-definition televisions (HDTVs). The cost per
screen is:
Variable cost per screen $ 119
Fixed cost per screen 32*
Total cost per screen $ 151
*Based on a capacity of 800,000 screens per year.
Part of the Screen Division's output is sold to outside manufacturers of HDTVs and part is sold to Stavos Company's
Quark Division, which produces an HDTV under its own name. The Screen Division charges $192 per screen for all sales.
The net operating income associated with the Quark Division's HDTV is computed as follows:
Selling price per unit $ 579
Variable cost per unit:
Cost of the screen $ 192
Variable cost of electronic parts 240
Total variable cost 432
Contribution margin 147
Fixed costs per unit 81*
Net operating income per unit $ 66
*Based on a capacity of 180,000 units per year.
The Quark Division has an order from an overseas source for 4,800 HDTVs. The overseas source wants to pay only $410
per unit.
Required:
Assume the Quark Division has enough idle capacity to fill the 4,800 - unit order. Is the division likely to accept the $410
price or to reject it?
Assume both the Screen Division and the Quark Division have idle capacity. Under these conditions, what is the financial
advantage (disadvantage) for the company as a whole (on a per unit basis) if the Quark Division rejects the $410 price?
Assume the Quark Division has idle capacity but the Screen Division is operating at capacity and could sell all of its
screens to outside manufacturers. Under these conditions, what is the financial advantage (disadvantage) for the
company as a whole (on a per unit basis) if the Quark Division accepts the $410 unit price?
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