Xenon Autocar Company manufactures automobiles. The Fastback Car Division sellsits cars for $50,000 each to the general public. The fastback cars have manufacturingcosts of $25,000 each for variable and $15,000 each for fixed costs. The division's totalfixed manufacturing costs are $75,000,000 at the normal volume of 5,000 units.The Coupe Car Division has been unable to meet the demand for its cars this year. It hasoffered to buy 1,000 cars from the Fastback Car Division at the full cost of $40,000.The Fastback Car Division has excess capacity and the 1,000 units can be producedwithout interfering with the current outside sales of 5,000. The 6,000 volume is withinthe division's relevant operating range.Explain whether the Fastback Car Division should accept the offer.Answer: Unit SalesVariable costsContribution margin$40,00025,000$15,000

Step 1:Decision making is a process where we choose one alternative based on relevant cost. Relevant…

Answered: Xenon Autocar Company manufactures…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter8: Tactical Decision-making And Relevant Analysis

Section: Chapter Questions

Problem 54P

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