Durant Company manufactures glass bottles for dairy products. The contribution margin is $0.42 per bottle. Durant just received notification that one of its orders for 180,000 bottles contained misprinted labels, and thus it had to recall and reprint the bottle labels. If it will cost $0.37 per bottle to reprint the labels and $1,000 to reship the bottles, what will the net contribution margin be after the recall?

Durant Company manufactures glass bottles for dairy products. The contribution margin is $0.42 per bottle. Durant just received notification that one of its orders for 180,000 bottles contained misprinted labels, and thus it had to recall and reprint the bottle labels. If it will cost $0.37 per bottle to reprint the labels and $1,000 to reship the bottles, what will the net contribution margin be after the recall?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 3PB: Cinnamon Depot bakes and sells cinnamon rolls for $1.75 each. The cost of producing 500,000 rolls in...

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Feinan Sports, Inc., manufactures sporting equipment, including weight-lifting gloves. A national sporting goods chain recently submitted a special order for 4,600 pairs of weight-lifting gloves. Feinan Sports was not operating at capacity and could use the extra business. Unfortunately, the orders offering price of 12.80 per pair was below the cost to produce them. The controller was opposed to taking a loss on the deal. However, the personnel manager argued in favor of accepting the order even though a loss would be incurred; it would avoid the problem of layoffs and would help maintain the community image of the company. The full cost to produce a pair of weight-lifting gloves is presented below. No variable selling or administrative expenses would be associated with the order. Non-unit-level activity costs are a small percentage of total costs and are therefore not considered. Required: 1. Assume that the company would accept the order only if it increased total profits. Should the company accept or reject the order? Provide supporting computations. 2. Suppose that Feinan Sports has negotiated with the potential customer, and has determined that it can substitute cheaper materials, reducing direct materials cost by 0.95 per unit. In addition, the companys engineers have found a way to reduce direct labor cost by 0.50 per unit. Should the company accept or reject the order? Provide supporting computations. 3. Consider the personnel managers concerns. Discuss the merits of accepting the order even if it decreases total profits.
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