Homework Help is Here – Start Your Trial Now!
Business
Accounting
Huang Automotive is presently operating at 75% of capacity. The company recently received an offer from a Korean truck manufacturer to purchase 22,500 units of a power steering system component for $196 per unit. Peter Wu, vice-president of sales, notes that although there will be an additional $2.25 shipping cost for each component, he thinks that accepting the order will get the company's "foot in the door" of an expanding international market. To determine variable and fixed costs, Huang's accountant used the high-low method with the following production and cost information for the last two years: 200,000 units 239,000 units Total costs $57,400,000 $64,303,000 Total costs per unit $287.00 $269.05 T.J. Chan, vice-president of engineering, feels that any new market should first show its profitability and that the $196 per unit offer is not only below the regular $260 selling price, but it's below the unit cost of the component. She also points out that there will be additional setup costs of $200,000 and that Huang will have to lease some special equipment for $255,000. REQUIRED 1. Using the high-low method to budget costs of the special order, what would the expected profit on the special order be (use a negative sign for a loss)? -274,125

Huang Automotive is presently operating at 75% of capacity. The company recently received an offer from a Korean truck manufacturer to purchase 22,500 units of a power steering system component for $196 per unit. Peter Wu, vice-president of sales, notes that although there will be an additional $2.25 shipping cost for each component, he thinks that accepting the order will get the company's "foot in the door" of an expanding international market. To determine variable and fixed costs, Huang's accountant used the high-low method with the following production and cost information for the last two years: 200,000 units 239,000 units Total costs $57,400,000 $64,303,000 Total costs per unit $287.00 $269.05 T.J. Chan, vice-president of engineering, feels that any new market should first show its profitability and that the $196 per unit offer is not only below the regular $260 selling price, but it's below the unit cost of the component. She also points out that there will be additional setup costs of $200,000 and that Huang will have to lease some special equipment for $255,000. REQUIRED 1. Using the high-low method to budget costs of the special order, what would the expected profit on the special order be (use a negative sign for a loss)? -274,125

Principles of Cost Accounting
Principles of Cost Accounting
17th Edition
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter10: Cost Analysis For Management Decision Making
Section: Chapter Questions
Problem 11P: Emerald Island Company is considering building a manufacturing plant in County Kerry. Predicting...
See similar textbooks
icon
Related questions
Question

need answer

Huang Automotive is presently operating at 75% of capacity. The company recently received an offer from a Korean truck manufacturer to purchase 22,500 units of a power steering system component for $196 per unit. Peter Wu, vice-president of sales, notes that although there will be an additional $2.25 shipping cost for each component, he thinks that accepting the order will get the company's "foot in the door" of an expanding international market. To determine variable and fixed costs, Huang's accountant used the high-low method with the following production and cost information for the last two years: 200,000 units 239,000 units Total costs $57,400,000 $64,303,000 Total costs per unit $287.00 $269.05 T.J. Chan, vice-president of engineering, feels that any new market should first show its profitability and that the $196 per unit offer is not only below the regular $260 selling price, but it's below the unit cost of the component. She also points out that there will be additional setup costs of $200,000 and that Huang will have to lease some special equipment for $255,000. REQUIRED 1. Using the high-low method to budget costs of the special order, what would the expected profit on the special order be (use a negative sign for a loss)? -274,125 Submit Answer Incorrect. Tries 2/6 Previous Tries
Transcribed Image Text:Huang Automotive is presently operating at 75% of capacity. The company recently received an offer from a Korean truck manufacturer to purchase 22,500 units of a power steering system component for $196 per unit. Peter Wu, vice-president of sales, notes that although there will be an additional $2.25 shipping cost for each component, he thinks that accepting the order will get the company's "foot in the door" of an expanding international market. To determine variable and fixed costs, Huang's accountant used the high-low method with the following production and cost information for the last two years: 200,000 units 239,000 units Total costs $57,400,000 $64,303,000 Total costs per unit $287.00 $269.05 T.J. Chan, vice-president of engineering, feels that any new market should first show its profitability and that the $196 per unit offer is not only below the regular $260 selling price, but it's below the unit cost of the component. She also points out that there will be additional setup costs of $200,000 and that Huang will have to lease some special equipment for $255,000. REQUIRED 1. Using the high-low method to budget costs of the special order, what would the expected profit on the special order be (use a negative sign for a loss)? -274,125 Submit Answer Incorrect. Tries 2/6 Previous Tries
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Principles of Cost Accounting
Principles of Cost Accounting
Accounting
ISBN:
9781305087408
Author:
Edward J. Vanderbeck, Maria R. Mitchell
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Managerial Accounting: The Cornerstone of Busines…
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser…
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Managerial Accounting
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
SEE MORE TEXTBOOKS