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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Xenon Autocar Company manufactures automobiles. The Fastback Car Division sells its cars for $50,000 each to the general public. The fastback cars have manufacturing costs of $25,000 each for variable and $15,000 each for fixed costs. The division's total fixed 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 has offered 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 produced without interfering with the current outside sales of 5,000. The 6,000 volume is within the division's relevant operating range. Explain whether the Fastback Car Division should accept the offer. Answer: Unit Sales Variable costs Contribution margin $40,000 25,000 $15,000
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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)…

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