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Operations Management
Direct materials. $384,000 Direct labor. 96,000 Overhead 288,000 Selling expenses.. 120,000 Administrative expenses 80,000 $968,000 Total costs and expenses . A new out-of-state distributor has offered to buy 50,000 units next month for $3.44 each. These units would be marketed in other states and would not affect Windmire's sales through its normal channels. A study of the costs of this new business reveals the following: • Direct materials costs are 100% variable. • Per unit direct labor costs for the additional units would be 50% higher than normal because their pro- duction would require overtime pay at 1½ times their normal rate to meet the distributor's deadline. • Twenty-five percent of normal annual overhead costs are fixed at any production level from 250,000 to 400,000 units. The remaining 75% of annual overhead costs are variable with volume. • Accepting the new business would involve no additional selling expenses. • Accepting the new business would increase administrative expenses by a $4,000 fixed amount. Required Prepare a three-column comparative income statement that shows the following: 1. Monthly operating income without the special order (column 1). 2. Monthly operating income received from the new business only (column 2). 3. Combined monthly operating income from normal business and the new business (column 3).

Direct materials. $384,000 Direct labor. 96,000 Overhead 288,000 Selling expenses.. 120,000 Administrative expenses 80,000 $968,000 Total costs and expenses . A new out-of-state distributor has offered to buy 50,000 units next month for $3.44 each. These units would be marketed in other states and would not affect Windmire's sales through its normal channels. A study of the costs of this new business reveals the following: • Direct materials costs are 100% variable. • Per unit direct labor costs for the additional units would be 50% higher than normal because their pro- duction would require overtime pay at 1½ times their normal rate to meet the distributor's deadline. • Twenty-five percent of normal annual overhead costs are fixed at any production level from 250,000 to 400,000 units. The remaining 75% of annual overhead costs are variable with volume. • Accepting the new business would involve no additional selling expenses. • Accepting the new business would increase administrative expenses by a $4,000 fixed amount. Required Prepare a three-column comparative income statement that shows the following: 1. Monthly operating income without the special order (column 1). 2. Monthly operating income received from the new business only (column 2). 3. Combined monthly operating income from normal business and the new business (column 3).

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Windmire Company manufactures and sells to local wholesalers approximately 300,000 units per month at a sales price of $4 per unit. Monthly costs for the production and sale of this quantity follow.

Direct materials. $384,000 Direct labor. 96,000 Overhead 288,000 Selling expenses.. 120,000 Administrative expenses 80,000 $968,000 Total costs and expenses . A new out-of-state distributor has offered to buy 50,000 units next month for $3.44 each. These units would be marketed in other states and would not affect Windmire's sales through its normal channels. A study of the costs of this new business reveals the following: • Direct materials costs are 100% variable. • Per unit direct labor costs for the additional units would be 50% higher than normal because their pro- duction would require overtime pay at 1½ times their normal rate to meet the distributor's deadline. • Twenty-five percent of normal annual overhead costs are fixed at any production level from 250,000 to 400,000 units. The remaining 75% of annual overhead costs are variable with volume. • Accepting the new business would involve no additional selling expenses. • Accepting the new business would increase administrative expenses by a $4,000 fixed amount. Required Prepare a three-column comparative income statement that shows the following: 1. Monthly operating income without the special order (column 1). 2. Monthly operating income received from the new business only (column 2). 3. Combined monthly operating income from normal business and the new business (column 3).
Transcribed Image Text:Direct materials. $384,000 Direct labor. 96,000 Overhead 288,000 Selling expenses.. 120,000 Administrative expenses 80,000 $968,000 Total costs and expenses . A new out-of-state distributor has offered to buy 50,000 units next month for $3.44 each. These units would be marketed in other states and would not affect Windmire's sales through its normal channels. A study of the costs of this new business reveals the following: • Direct materials costs are 100% variable. • Per unit direct labor costs for the additional units would be 50% higher than normal because their pro- duction would require overtime pay at 1½ times their normal rate to meet the distributor's deadline. • Twenty-five percent of normal annual overhead costs are fixed at any production level from 250,000 to 400,000 units. The remaining 75% of annual overhead costs are variable with volume. • Accepting the new business would involve no additional selling expenses. • Accepting the new business would increase administrative expenses by a $4,000 fixed amount. Required Prepare a three-column comparative income statement that shows the following: 1. Monthly operating income without the special order (column 1). 2. Monthly operating income received from the new business only (column 2). 3. Combined monthly operating income from normal business and the new business (column 3).
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