Required: 1. Compute the incremental profit (or loss) from accepting the special order. 2. Should Mohave accept the special order? 3. Suppose the special order had been to purchase 3,200 umbrellas for $23.00 each. Recompute the incremental profit (or loss) from accepting the special order under this scenario.
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- Mohave Corporation makes several varieties of beach umbrellas and accessories. It has been approached by a company called Lost Mine Industries about producing a special order for a custom umbrella called the Ultimate Shade (US). The special-order umbrellas with the Lost Mine Company logo would be distributed to participants at an upcoming convention sponsored by Lost Mine. Lost Mine offered to buy 3,200 US umbrellas at a price of $33 each. Mohave currently has the excess capacity necessary to accept the offer. The following information is related to the production of the US umbrella: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost Regular sales price Required: 1. Compute the incremental profit (or loss) from accepting the special order. 2. Should Mohave accept the special order? 3. Suppose the special order had been to purchase 3,700 umbrellas for $29.00 each. Recompute the incremental profit (or loss) from accepting the special…Mohave Corp. makes several varieties of beach umbrellas and accessories. It has been approached by a company called Lost Mine Industries about producing a special order for a custom umbrella called the Ultimate Shade (US). The special-order umbrellas with the Lost Mine Company logo would be distributed to participants at an upcoming convention sponsored by Lost Mine. Lost Mine has offered to buy 2,400 of the US umbrellas at a price of $20 each. Mohave currently has the excess capacity necessary to accept the offer. The following information is related to the production of the US umbrella: Direct materials $ 9.00 Direct labor 5.00 Variable manufacturing overhead 5.50 Fixed manufacturing overhead 2.50 Total cost $ 22.00 Regular sales price $ 28.00 Required:1. Compute the incremental profit (or loss) from accepting the special order.2. Should Mohave accept the special order?3. Suppose that the special order had been to purchase 2,900 umbrellas for $17.00…Mohave Corp. makes several varieties of beach umbrellas and accessories. It has been approached by a company called Lost Mine Industries about producing a special order for a custom umbrella called the Ultimate Shade (US). The special-order umbrellas with the Lost Mine Company logo would be distributed to participants at an upcoming convention sponsored by Lost Mine. Lost Mine has offered to buy 3,400 of the US umbrellas at a price of $35 each. Mohave currently has the excess capacity necessary to accept the offer. The following information is related to the production of the US umbrella: Direct materials. Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost Regular sales price. $14.00 8.00 10.50 2.50 $35.00 $43.00 Required: 1. Compute the incremental profit (or loss) from accepting the special order. 2. Should Mohave accept the special order? 3. Suppose that the special order had been to purchase 3,900 umbrellas for $32.00 each. Recompute the…
- Mohave Corp. makes several varieties of beach umbrellas and accessories. It has been approached by a company called Lost Mine Industries about producing a special order for a custom umbrella called the Ultimate Shade (US). The special-order umbrellas with the Lost Mine Company logo would be distributed to participants at an upcoming convention sponsored by Lost Mine. Lost Mine has offered to buy 3,200 of the US umbrellas at a price of $33 each. Mohave currently has the excess capacity necessary to accept the offer. The following information is related to the production of the US umbrella: Direct materials $ 13.00 Direct labor 7.00 Variable manufacturing overhead 9.50 Fixed manufacturing overhead 2.50 Total cost $ 32.00 Regular sales price $ 41.00 Required:1. Assume that Mohave is operating at full capacity. Calculate the special-order price per unit at which Mohave would be indifferent between accepting or rejecting the special order.Orbital Communications, Inc. manufactures communications satellites used in TV signal transmission. The firm currently purchases one component for its satellites from a European firm. An Orbital Communications engineering team has found a way to use the company’s own component, part numberA200, instead of the European component. However, the Orbital Communications component must be modified at a cost of $500 per part. The European component costs $8,900 per part. Orbital Communications’part number A200 costs $5,100 before it is modified. Orbital Communications currently uses 10 of the European components per year.Required: Calculate the annual differential cost between Orbital Communications’ two production alternatives.MaxiDrive manufactures a wide variety of parts for recreational boating, including a gear and driveshaft part for high-powered outboard boat engines. Original equipment manufacturers such as Mercury and Honda purchase the components for use in large, powerful outboards. The part sells for $688, and sales volume averages 32,000 units per year. Recently, MaxiDrive's major competitor reduced the price of its equivalent unit to $628. The market is very competitive, and MaxiDrive realizes it must meet the new price or lose significant market share. Management has begun paying closer attention to costs and has reconfirmed the current existing standard costs. The controller then assembled the following cost and usage data for the most recent year for MaxiDrive's production of 32,000 units: Direct materials Direct labor Indirect labor Inspection (hours and cost) Materials handling (number of purchases and cost) Machine setups (number and cost) Returns and rework (number of times and cost)…
- MaxiDrive manufactures a wide variety of parts for recreational boating, including a gear and driveshaft part for high- powered outboard boat engines. Original equipment manufacturers such as Mercury and Honda purchase the components for use in large, powerful outboards. The part sells for $690, and sales volume averages 30,500 units per year. Recently, MaxiDrive's major competitor reduced the price of its equivalent unit to $616. The market is very competitive, and MaxiDrive realizes it must meet the new price or lose significant market share. Management has begun paying closer attention to costs and has reconfirmed the current existing standard costs. The controller then assembled the following cost and usage data for the most recent year for MaxiDrive's production of 30,500 units: Direct materials Direct labor Indirect labor Inspection (hours and cost) 1,140 Materials handling (number of purchases and cost) Machine setups (number and cost) 5,150 775,000 4,000 1,950 1,025,000…North Platt Machinery Company manufactures a shaft that must fit inside a sleeve. The firm has just received an order of 50,000 units from Southernstar Exploration Company for $80 per unit. North Platt can manufacture the shaft at $50 per unit. Southernstar desires the diameter of the shaft to be 1.275 cm. The diameter of the shaft must not be less than 1.25 cm in order to fit properly inside the sleeve. To be able to insert the shaft into a sleeve without the use of force, the diameter cannot be larger than 1.30 cm. A defective shaft is discarded and a replacement has to be shipped via express freight to locations around the world. North Platt estimates that the average cost of handling and shipping a replacement shaft will be approximately $70. Shown below are the diameters from a sample of 80 shafts manufactured during a trial run: Diameter Number of Units Diameter 1.232 1 1.273 Number of Units 6 Number of Diameter Units 1.292 2 1.240 2 1.274 7 1.293 1 1.250 3 1.275 18 1.294 4 1.258…North Platt Machinery Company manufactures a shaft that must fit inside a sleeve. The firm has just received an order of 50,000 units from Southernstar Exploration Company for $80 per unit. North Platt can manufacture the shaft at $50 per unit. Southernstar desires the diameter of the shaft to be 1.275 cm. The diameter of the shaft must not be less than 1.25 cm in order to fit properly inside the sleeve. To be able to insert the shaft into a sleeve without the use of force, the diameter cannot be larger than 1.30 cm. A defective shaft is discarded and a replacement has to be shipped via express freight to locations around the world. North Platt estimates that the average cost of handling and shipping a replacement shaft will be approximately $70. Shown below are the diameters from a sample of 80 shafts manufactured during a trial run: Diameter Number of Units Diameter Number of Units Diameter Number of Units 1.232 1 1.273 6 1.292 2 1.240 2 1.274 7 1.293 1 1.250 3…
- MaxiDrive manufactures a wide variety of parts for recreational boating, including a gear and driveshaft part for high-powered outboard boat engines. Original equipment manufacturers such as Mercury and Honda purchase the components for use in large, powerful outboards. The part sells for $630, and sales volume averages 26,500 units per year. Recently, MaxiDrive's major competitor reduced the price of its equivalent unit to $559. The market is very competitive, and MaxiDrive realizes it must meet the new price or lose significant market share. Management has begun paying closer attention to costs and has reconfirmed the current existing standard costs. The controller then assembled the following cost and usage data for the most recent year for MaxiDrive's production of 26,500 units: Direct materials Direct labor Indirect labor Inspection (hours and cost) Materials handling (number of purchases and cost) Machine setups (number and cost) Returns and rework (number of times and cost)…James Company makes flanges for its main product of widgets. The cost of making each widget is as follows: Another company has offered to sell to James Company the flanges for a price of $19.00 each. Should James Company buy the flanges from the other company or continue to make the flanges themselves? Show your computations.BeLuxe Company manufactures a variety of natural skin care products that are used in spas across Canada. Its most popular product is its “Cleopatra Gold” serum, made with locally produced ingredients. Currently, the company is operating at about 80 percent capacity, and is quite profitable. BeLuxe has been approached by a distributor in South Korea, asking to purchase 8,000 units of the serum, at a price of $40 per unit. BeLuxe’s product cost for each unit of Cleopatra Gold serum includes the following: Direct materials $ 16 Direct labour 10 Variable manufacturing overhead 8 Fixed manufacturing overhead 15 Total manufacturing cost $49 BeLuxe will save $2 per unit in sales commission costs on this order as it has come directly from the customer, and the distributor will cover all shipping costs. Currently, the serum is sold for $65 to its other customers. Production management believes that it can handle the special order without disrupting its…