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 1,500 of the US umbrellas at a price of $11 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 Profit (or Loss) $5,00 2.00 Required: 1. Compute the incremental profit (or loss) from accepting the special order. by 3.50 2.50 $13.00 $19.00
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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.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 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 1,600 US umbrellas at a price of $12 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 $ 5.00 Direct labor 2.00 Variable manufacturing overhead 1.50 Fixed manufacturing overhead 2.50 Total cost $ 11.00 Regular sales price $ 20.00 Required: Compute the incremental profit (or loss) from accepting the special order. Should Mohave accept the special order? Suppose the special order had been to purchase 2,100 umbrellas for $8.00 each. Recompute the…
- 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…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…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.
- Wheels, Inc. manufactures bicycles sold through retail bicycle shops in the southeastern United States. The company has two salespeople that do more than just sell the products—they manage relationships with the bicycle shops to enable them to better meet consumers’ needs. The company’s sales reps visit the shops several times per year, often for hours at a time. The owner of Wheels is considering expanding to the rest of the country and would like to have distribution through 1,000 bicycle shops. To do so, however, the company would have to hire more salespeople. Each salesperson earns $40,000 plus 2 percent commission on all sales annually. Another alternative is to use the services of sales agents instead of its own sales force. Sales agents would be paid 5 percent of sales. Determine the number of salespeople Wheels needs if it has 1,000 bicycle shop accounts that need to be called on four times per year. Each sales call lasts approximately 2.5 hours, and each sales rep has…Wheels, Inc. manufactures bicycles sold through retail bicycle shops in the southeastern United States. The company has two salespeople that do more than just sell the products—they manage relationships with the bicycle shops to enable them to better meet consumers’ needs. The company’s sales reps visit the shops several times per year, often for hours at a time. The owner of Wheels is considering expanding to the rest of the country and would like to have distribution through 1,000 bicycle shops. To do so, however, the company would have to hire more salespeople. Each salesperson earns $40,000 plus 2 percent commission on all sales annually. Another alternative is to use the services of sales agents instead of its own sales force. Sales agents would be paid 5 percent of sales. At what level of sales would it be more cost efficient for Wheels to use to sales agents compared with its own sales force? To determine this, consider the fixed and variable costs for each alternative. What are…Marquette receives a proposal from an outside contractor who offers to make and ship 1,500 fences directly to Marquette’s customers as orders arrive from Marquette’s sales force. When managers meet to discuss this proposal, Product Manager Will Hansen brings up the fact that they have the design for an electric fence that can be used for large animals that has never been produced. Will suggests that this may be the perfect time to launch this new product and at a selling price of $225 per unit it is sure to increase sales revenue. The production manager calculates that the idle time created by accepting the contractors offer would allow them to produce 1,000 of the new fence. The cost to produce the new fence would be $175 in variable manufacturing expense but fixed manufacturing and marketing costs would remain unchanged. The product mix would now be 1,000 of the new fence and 1,500 of the old fence. If Marquette wants to seriously consider taking the contractors offer, what in-house…
- Wheels, Inc. manufactures bicycles sold through retail bicycle shops in the southeastern United States. The company has two salespeople that do more than just sell the products - they manage relationships with the bicycle shops to enable them to better meet consumers' needs. The company's sales reps visit the shops several times per year, often for hours at a time. The owner of Wheels is considering expanding to the rest of the country and would like to have distribution through 450 bicycle shops. To do so, however, the company would have to hire more salespeople. Each salesperson earns $30,000 plus 3 percent commission on all sales annually. Another alternative is to use the services of sales agents instead of its own sales force. Sales agents would be paid 6 percent of sales. Each sales call lasts approximately 3 hours, and each sales rep has approximately 675 hours per year to devote to customers. Wheels needs 6 salespeople if it has 450 bicycle shop accounts that need to be called…Coram Audio makes wireless headphones. Each pair of headphones comes with a travel case. Since its founding. Coram has manufactured its own travel cases. Recently, Holmur Travel Gear (HTG), a local outfitter that manufactures and sells backpacks, tent cases, and so on, contacted Coram and proposed that they produce the headphone travel cases. Based on management experience, Coram's cost per travel case is as follows (based on annual production of 42,800 units). Direct materials Direct labor Variable overhead Fixed overhead Total $ 10.00 21.20 6.40 4.70 $ 42.30 HTG has offered to sell the case to Coram for $39 each. The total order would amount to 42,800 travel cases per year. Coram's management decides that they will make the switch to HTG cases if Coram can save at least $13,400 per year. Accepting the offer would eliminate annual fixed overhead of $81,320. Required: a. Prepare a schedule that shows the total differential costs. b. Should Coram continue to make the travel cases or buy…Wheels Inc. is a manufacturer of bicycles sold through retail bicycle shops in the southeastern United States. The company has two sales people that do more than just sell the product-they manage relationships with the bicycle shops to enable them to better meet the consumers' needs. The company's sales reps visits the shop several times per year, often for hours at a time. The owner of wheels is considering expanding to the rest of the country and would like to have distribution through 1000 bicycle shops. To do so, Howe the company would have to hire more salespeople. Each sales person earn $40,000 plus 2 percent commission on all sales. Another alternative is to use the services of sales agents instead of its own sales force. Sales agents would be paid 5 percent of sales. a) determine the number of sales people Wheels need if it has 1000 bicycle shop accounts that need to be called on four time per year. Each sales call lasts approximately 2.5 hours, and each sales rep has…