The Arthur Company manufactures kitchen utensils. The company is currently producing well below its full capacity. The Benton Company has approachedArthur with an offer to buy 17,000 utensils at $0.85 each. Arthur sells its utensils wholesale for $0.96 each; the average cost per unit is $0.91, of which $0.10 isfixed costs. If Arthur were to accept Benton's offer, what would be the increase in Arthur's operating profits?Multiple ChoiceOO$850.$1,020.$680.$1,870.

Special order processing is a type of order fulfillment process that involves the customization of a…

Answered: The Arthur Company manufactures kitchen…

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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Diamond Boot Factory normally sells its specialty boots for $23 a pair. An offer to buy 105 boots for $16 per pair was made by an organization hosting a national event in Norfolk. The variable cost per boot is $8, and special stitching will add another $3 per pair to the cost. Determine the differential income or loss per pair of boots from selling to the organization.$ Should Diamond Boot Factory accept or reject the special offer?
The president of Midnight Rambler wants to know if he should allow Jack Flash to have the scooters for $120,000. Determine the effect on profits from accepting Jack Flash’s offer. Briefly explain why certain costs should be omitted from the analysis in requirement (a.) Assume Midnight Rambler is operating at capacity and could sell the 300 scooters at its regular markup: Determine the Opportunity Cost of accepting Jack Flash’s offer. Determine the effect on profits of accepting Jack Flash’s offer What other factors should Midnight Rambler consider before deciding to accept the special order?
Rainbow Paints operates a chain of retail paint stores. Although the paint is sold under the Rainbow label, it is purchased from an independent paint manufacturer. Guy Walker, president of Rainbow Paints, is studying the advisability of opening another store. His estimates of monthly costs for the proposed location are as follows: Fixed costs: Occupancy costs Salaries Other Variable costs (including cost of paint) $6 per gallon Although Rainbow stores sell several different types of paint, monthly sales revenue consistently averages $10 per gallon sold. Required: a. Compute the contribution margin ratio and the break-even point in dollar sales and in gallons sold for the proposed store. c. Walker thinks that the proposed store will sell between 2,200 and 2,600 gallons of paint per month. Compute the amount of operating income that would be earned per month at each of these sales volumes. a. Contribution margin ratio a. Break-even sales volume in dollars a. Break-even sales volume in…
Micro Enterprises has the capacity to produce 10,000 widgets a month, and currently makes and sells 9,000 widgets a month. Widgets normally sell for $6 each, and cost an average of $5 to make, including fixed costs. The monthly fixed costs are S18,000. Coyote Corp. has offered to buy 1,000 widgets at $4 each. On this information alone, should Micro accept the offer? A. No, because it will lose $1 per unit B. No, because it will lose $2 per unit C. No, because it will exceed capacity D. Yes, because it makes $1 per unit in the short run E. Unable to determine
HighValu Incorporated manufactures a moderately priced set of lawn furniture (a table and four chairs) that it sells for $270. The company currently manufactures and sells 6, 900 sets per year. The manufacturing costs include $94 for direct materials and $54 for direct labor per set. The overhead charge per set is $44, which consists entirely of fixed costs. Highvalu is considering a special purchase offer from a large retail firm, which has offered to buy 690 sets per year for three years at a price of $186 per set. Highvalu has the available plant capacity to produce the order and expects no other orders or profitable alternative uses of the plant capacity. Required: 1. What is the total relevant cost per unit to produce the units requested by the retail firm? 2. What is the estimated net effect on annual operating income if Highvalu accepts the special sales order?
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Monica is a manufacturer of handcrafted wooden signs. The variable cost of each wooden sign Monica produces is $40. Monica sells her wooden signs to a wholesaler at a 50% margin, who then sells the wooden signs to the retailer at an undisclosed markup (%). The retailer then adds a 30% margin and sells the product to the consumer at $160. Based on this information, what is the markup (%) of the wholesaler? 40% 20% 60 50%
Answer the following questions. 1. Douglas Computers makes 5,900 units of a circuit board, CB76 at a cost of $220 each. Variable cost per unit is $170 and fixed cost per unit is $50. Peach Electronics offers to supply 5,900 units of CB76 for $200. If Douglas buys from Peach it will be able to save $20 per unit in fixed costs but continue to incur the remaining $30 per unit. Should Douglas accept Peach's offer? Explain. 1. Douglas Computers makes 5,900 units of a circuit board, CB76 at a cost of $220 each. Variable cost per unit is $170 and fixed cost per unit is $50. Peach Electronics offers to supply 5,900 units of CB76 for $200. If Douglas buys from Peach it will be able to save $20 per unit in fixed costs but continue to incur the remaining $30 per unit. Should Douglas accept Peach's offer? Explain. Begin by calculating the relevant cost per unit. (If a box is not used in the table, leave the box empty; do not enter a zero.) Make Buy Relevant costs: Unit relevant cost Douglas…
Ashley’s company is looking to add two new printers that will increase fixed costs by $75,000. The variable costs are $50 per order. The two new printers allow the business to increase their orders by 5000 annually. How many orders would have to be added to justify buying these new printers, vs not making any changes and continuing as they are? What other considerations might you consider in whether or not to make this purchase or not?
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Diamond Boot Factory normally sells its specialty boots for $35 a pair. An offer to buy 125 boots for $31 per pair was made by an organization hosting a national event in Norfolk. The variable cost per boot is $12, and special stitching will add another $2 per pair to the cost. Determine the differential income or loss per pair of boots from selling to the organizatio
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