None 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

As we can see, the problem provided for the additional unit contribution margin per special order…

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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Jordan Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Jordan produces and sells only 6,700 bikes each year. Due to the low volume of activity, Jordan is unable to obtain the economies of scale that larger producers achieve. For example, Jordan could buy the handlebars for $40 each; they cost $43 each to make. The following is a detailed breakdown of current production costs. Unit Total Item Cost Unit-level costs $ 113,900 60,300 13,400 $17 Materials Labor 9 Overhead 2 Allocated facility-level 15 100,500 Costs Total $43 $288,100 After seeing these figures, Jordan's president remarked that it would be foolish for the company to continue to produce the handlebars at $43 each when it can buy them for $40 each Required: a. Calculate the total relevant cost Per Unit Total Total relevant cost b.Do you agree with the president's conclusion? Yes O No
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The Trailer division of Baxter Bicycles makes bike trailers that attach to bicycles and can carry childrenor cargo. The trailers have a retail price of $200 each. Each trailer incurs $80 of variable manufacturingcosts. The Trailer division has capacity for 40,000 trailers per year and incurs fixed costs of $1,000,000per year. Assume the Trailer division currently only sells 20,000 Trailers to outside customers, and the Assembly division wants to buy 15,000 trailers per year from the Trailer division. What is the range of acceptable prices that could be used on transfers between Baxter Bicycles’s divisions? Explain.
Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $15.00 per ball, of which 60% is direct labor cost. Last year, the company sold 54,000 of these balls, with the following results: Sales (54,000 balls) $ 1,350,000 Variable expenses 810,000 Contribution margin 540,000 Fixed expenses 372,000 Net operating income $ 168,000 Required: 1. Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year’s sales level. 2. Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $3.00 per ball. If this change takes place and the selling price per ball remains constant at $25.00, what will be next year's CM ratio and the break-even point in balls? 3. Refer to the data in (2)…
Jordan Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Jordan produces and sells only 6,200 bikes each year. Due to the low volume of activity, Jordan is unable to obtain the economies of scale that larger producers achieve. For example, Jordan could buy the handlebars for $32 each; they cost $35 each to make. The following is a detailed breakdown of current production costs Unit Cost Total Item Unit-level costs 16 99,200 62,000 18,600 Materials Labor 10 Overhead 3 Allocated facility-level 6 37,200 Costs $35 $217,000 Total After seeing these figures, Jordan's president remarked that it would be foolish for the company to continue to produce the handlebars at $35 each when it can buy them for $32 each Required: a. Calculate the total relevant cost. Per Unit Total Total relevant cost b. Do you agree with the president's conclusion? Yes ONo оо

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