Yardwork Tools Corp manufactures garden tools in a factory in Taneytown, Maryland. Recently, the company designed a collection of tools for professional use rather than consumer use. Management needs to make a good decision about whether to produce this line in their existing space in Maryland, where space is available or to accept an offer from a manufacturer in Taiwan. Data concerning the decision are as follows: Expected annual sales of tools (in units) 660,000 Average selling price of tools $11 Price quoted by Taiwanese company, in New Taiwanese Dollars (NTD) 27,300 Current exchange rate 9,100 NTD = $1 Variable manufacturing costs $2.85 per unit Incremental annual fixed manufacturing costs associated with the new product line $310,000 Variable selling and distribution costsª $0.50 per unit Annual fixed selling and distribution costsª $250,000 ªSelling and distribution costs are the same regardless of whether the tools are manufactured in Maryland or imported.
Yardwork Tools Corp manufactures garden tools in a factory in Taneytown, Maryland. Recently, the company designed a collection of tools for professional use rather than consumer use. Management needs to make a good decision about whether to produce this line in their existing space in Maryland, where space is available or to accept an offer from a manufacturer in Taiwan. Data concerning the decision are as follows: Expected annual sales of tools (in units) 660,000 Average selling price of tools $11 Price quoted by Taiwanese company, in New Taiwanese Dollars (NTD) 27,300 Current exchange rate 9,100 NTD = $1 Variable manufacturing costs $2.85 per unit Incremental annual fixed manufacturing costs associated with the new product line $310,000 Variable selling and distribution costsª $0.50 per unit Annual fixed selling and distribution costsª $250,000 ªSelling and distribution costs are the same regardless of whether the tools are manufactured in Maryland or imported.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Yardwork Tools
Corp manufactures garden tools in a factory in Taneytown, Maryland. Recently, the company designed a collection of tools for professional use rather than consumer use. Management needs to make a good decision about whether to produce this line in their existing space in Maryland, where space is available or to accept an offer from a manufacturer in Taiwan. Data concerning the decision are as follows:
|
Expected annual sales of tools (in units)
|
660,000
|
|---|---|
|
Average selling price of tools
|
$11
|
|
Price quoted by Taiwanese company, in New Taiwanese Dollars (NTD)
|
27,300
|
|
Current exchange rate
|
9,100 NTD = $1
|
|
Variable
|
$2.85 per unit
|
|
Incremental annual fixed manufacturing costs associated with the new product line
|
$310,000
|
|
Variable selling and distribution costsª
|
$0.50 per unit
|
|
Annual fixed selling and distribution costsª
|
$250,000
|
ªSelling and distribution costs are the same regardless of whether the tools are manufactured in Maryland or imported.
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