Wallace CorporationTotalKimberly CorporationS400,000Revenues$240,000$160,000Variable costs129,600112,000241,600158,400Contribution margin110,40048,000Fixed costs (allocated)Operating incomeMachine-hours required75,00050,000125,000$ 35,400$ (2,000)$ 33,4002,400 hours800 hours3,200 hoursKimberly Corporation indicates that it wants Newbury to do an additional $160,000 worth of printing jobsduring February. These jobs are identical to the existing business Newbury did for Kimberly in January interms of variable costs and machine-hours required. Newbury anticipates that the business from WallaceCorporation in February will be the same as that in January. Newbury can choose to accept as much of theWallace and Kimberly business for February as its capacity allows. Assume that total machine-hours andfixed costs for February will be the same as in January.What action should Newbury take to maximize its operating income? Show your calculations. Whatother factors should Newbury consider before making a decision?Required

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Asked Jan 21, 2020
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Choosing customers. 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:

Wallace Corporation
Total
Kimberly Corporation
S400,000
Revenues
$240,000
$160,000
Variable costs
129,600
112,000
241,600
158,400
Contribution margin
110,400
48,000
Fixed costs (allocated)
Operating income
Machine-hours required
75,000
50,000
125,000
$ 35,400
$ (2,000)
$ 33,400
2,400 hours
800 hours
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?
Required
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Wallace Corporation Total Kimberly Corporation S400,000 Revenues $240,000 $160,000 Variable costs 129,600 112,000 241,600 158,400 Contribution margin 110,400 48,000 Fixed costs (allocated) Operating income Machine-hours required 75,000 50,000 125,000 $ 35,400 $ (2,000) $ 33,400 2,400 hours 800 hours 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? Required

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