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Newbury Printers operates a printing press with a monthly capacity of 3,200 machine-hours. Newbury has two main customers: Wallace Corporation and Kimberly Corporation. Data on each customer for January are: IT) Kimberly Corporation $160,000 112,000 48,000 Wallace Corporation $240,000 Total Revenues $400,000 Variable costs 129,600 241,600 Contribution margin Fixed costs (allocated) 110,400 158,400 75,000 $ 35,400 2,400 hours 50,000 Operating income Machine-hours required $ (2,000) 800 hours 125,000 $ 33,400 3,200 hours Kimberly Corporation indicates that it wants Newbury to do an additional $160,000 worth of printing jobs during February. These jobs are identical to the existing business Newbury did for Kimberly in January in terms of variable costs and machine-hours required. Newbury anticipates that the business from Wallace Corporation in February will be the same as that in January. Newbury can choose to accept as much of the Wallace and Kimberly business for February as its capacity allows. Assume that total machine-hours and fixed costs for February will be the same as in January. What action should Newbury take to maximize its operating income? Show your calculations. What other factors should Newbury consider before making a decision?

Newbury Printers operates a printing press with a monthly capacity of 3,200 machine-hours. Newbury has two main customers: Wallace Corporation and Kimberly Corporation. Data on each customer for January are: IT) Kimberly Corporation $160,000 112,000 48,000 Wallace Corporation $240,000 Total Revenues $400,000 Variable costs 129,600 241,600 Contribution margin Fixed costs (allocated) 110,400 158,400 75,000 $ 35,400 2,400 hours 50,000 Operating income Machine-hours required $ (2,000) 800 hours 125,000 $ 33,400 3,200 hours Kimberly Corporation indicates that it wants Newbury to do an additional $160,000 worth of printing jobs during February. These jobs are identical to the existing business Newbury did for Kimberly in January in terms of variable costs and machine-hours required. Newbury anticipates that the business from Wallace Corporation in February will be the same as that in January. Newbury can choose to accept as much of the Wallace and Kimberly business for February as its capacity allows. Assume that total machine-hours and fixed costs for February will be the same as in January. What action should Newbury take to maximize its operating income? Show your calculations. What other factors should Newbury consider before making a decision?

Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter10: Short-term Decision Making
Section: Chapter Questions
Problem 6PA: Gent Designs requires three units of part A for every unit of Al that it produces. Currently, part A...
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Newbury Printers operates a printing press with a monthly capacity of 3,200 machine-hours. Newbury has two main customers: Wallace Corporation and Kimberly Corporation. Data on each customer for January are: IT) Kimberly Corporation $160,000 112,000 48,000 Wallace Corporation $240,000 Total Revenues $400,000 Variable costs 129,600 241,600 Contribution margin Fixed costs (allocated) 110,400 158,400 75,000 $ 35,400 2,400 hours 50,000 Operating income Machine-hours required $ (2,000) 800 hours 125,000 $ 33,400 3,200 hours Kimberly Corporation indicates that it wants Newbury to do an additional $160,000 worth of printing jobs during February. These jobs are identical to the existing business Newbury did for Kimberly in January in terms of variable costs and machine-hours required. Newbury anticipates that the business from Wallace Corporation in February will be the same as that in January. Newbury can choose to accept as much of the Wallace and Kimberly business for February as its capacity allows. Assume that total machine-hours and fixed costs for February will be the same as in January. What action should Newbury take to maximize its operating income? Show your calculations. What other factors should Newbury consider before making a decision?
Transcribed Image Text:Newbury Printers operates a printing press with a monthly capacity of 3,200 machine-hours. Newbury has two main customers: Wallace Corporation and Kimberly Corporation. Data on each customer for January are: IT) Kimberly Corporation $160,000 112,000 48,000 Wallace Corporation $240,000 Total Revenues $400,000 Variable costs 129,600 241,600 Contribution margin Fixed costs (allocated) 110,400 158,400 75,000 $ 35,400 2,400 hours 50,000 Operating income Machine-hours required $ (2,000) 800 hours 125,000 $ 33,400 3,200 hours Kimberly Corporation indicates that it wants Newbury to do an additional $160,000 worth of printing jobs during February. These jobs are identical to the existing business Newbury did for Kimberly in January in terms of variable costs and machine-hours required. Newbury anticipates that the business from Wallace Corporation in February will be the same as that in January. Newbury can choose to accept as much of the Wallace and Kimberly business for February as its capacity allows. Assume that total machine-hours and fixed costs for February will be the same as in January. What action should Newbury take to maximize its operating income? Show your calculations. What other factors should Newbury consider before making a decision?
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