Wallace Corporation $240,000 Kimberly Corporation $160,000 Total Revenues S400,000 Variable costs Contribution margin Fixed costs (allocated) Operating income Machine-hours required 129,600 110,400 75,000 112,000 48,000 50,000 $ (2,000) 800 hours 241,600 158,400 $ 35,400 2,400 hours 125,000 $ 33,400 3,200 hours Kimberly Corporation indicates that it wants Newbury to do an additional $160,000 worth of printing jobs during February. These jobs are identical to the existing business Newbury did for Kimberly in January in terms of variable costs and machine-hours required. Newbury anticipates that the business from Wallace Corporation in February will be the same as that in January. Newbury can choose to accept as much of the Wallace and Kimberly business for February as its capacity allows. Assume that total machine-hours and fixed costs for February will be the same as in January. What action should Newbury take to maximize its operating income? Show your calculations. What other factors should Newbury consider before making a decision? Required

Wallace Corporation $240,000 Kimberly Corporation $160,000 Total Revenues S400,000 Variable costs Contribution margin Fixed costs (allocated) Operating income Machine-hours required 129,600 110,400 75,000 112,000 48,000 50,000 $ (2,000) 800 hours 241,600 158,400 $ 35,400 2,400 hours 125,000 $ 33,400 3,200 hours Kimberly Corporation indicates that it wants Newbury to do an additional $160,000 worth of printing jobs during February. These jobs are identical to the existing business Newbury did for Kimberly in January in terms of variable costs and machine-hours required. Newbury anticipates that the business from Wallace Corporation in February will be the same as that in January. Newbury can choose to accept as much of the Wallace and Kimberly business for February as its capacity allows. Assume that total machine-hours and fixed costs for February will be the same as in January. What action should Newbury take to maximize its operating income? Show your calculations. What other factors should Newbury consider before making a decision? Required

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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