The Cloud Burst Sprinkler Company of Benicia, California has been manufacturing and selling a water efficient sprinkler exclusively to Home Depot for the last two years. Although there is not a binding contract that gives Home Depot exclusive rights to buy and stock the sprinkler in their network of locations, Cloud Burst has placed a great deal of importance on keeping Home Depot locations across the country and Canada fully stocked with their water efficient sprinkler. ACE Hardware has approached Cloudburst indicating they would like to stock the water efficient sprinkler in their 4,192 stores across the United States. The initial proposal submitted by ACE is to purchase 50,304 sprinklers which will result in a dozen sprinklers stocked in every store. The proposal received from ACE will NOT affect fixed costs, however, ACE has requested a special onetime quantity wholesale discount price of $5.80 per sprinkler For the first 6 months of 2022, Cloud Burst Sprinkler Company achieved the following results operating at 63% capacity and selling 122,400 sprinklers exclusively to Home Depot: Sales to Home Depot $826,200 Cost of Goods Sold 532,440 Gross Profit 293,760 Operating Expenses: Variable Portion 24,480 Fixed Portion 115,000 Net Income $154,280 Cost of goods sold is 100% variable; operating expenses are 20% variable and 80% fixed. Instructions: (a) Prepare an incremental analysis for the ACE Hardware proposal. (b) Should Cloud Burst Sprinkler Company accept the ACE Hardware proposal? (c) What “Qualitative” Factors should the Cloud Burst Sprinkler Company think about and consider in making a decision to accept the ACE Hardware proposal?
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- 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.arrow_forwardCalifornia Circuits Company (3C) manufactures a variety of components. Its Valley plant specializes in two electronic components used in circuit boards. These components serve the same function and perform equally well. The difference in the two products is the raw material. The XL-D chip is the older of the two components and is made with a metal that requires a wash prior to assembly. Originally, the plant released the wastewater directly into a local river. Several years ago, the company was ordered to treat the wastewater before its release, and it installed relatively expensive equipment. While the equipment is fully depreciated, annual operating expenses of $260,000 are still incurred for wastewater treatment. Two years ago, company scientists developed an alloy with all of the properties of the raw materials used in XL-D that generates no wastewater. Some prototype components using the new material were produced and tested and found to be indistinguishable from the old…arrow_forwardABC Ltd manufactures a range of frozen convenience meals. The company operates production plants globally and partners with thousands of farmers and growers around the world. It packages, stores and transports its own products, and their products are consumed by millions of customers every day. The company, along with its partnering farmers and growers, have been under increasing pressure to adapt to climate change and mitigate environmental impacts. There has been an increase in water usage across the years and some of the growing regions experienced severe drought. Further, changes in social demand have resulted in increased interest on food safety and quality and sustainable packaging. The production manager of ABC Ltd wants funding for a new and more energy-efficient machine. The machine has a purchase price of $2,300,000, an estimated useful life of four years and no residual value. Projected operating data that shows the incremental revenue and costs for the first year is as…arrow_forward
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