Yardwork ToolsCorp manufactures garden tools in a factory in Taneytown, Maryland. Recently, the company designed a collection of tools for professional use rather than consumer use. Management needs to make a good decision about whether to produce this line in their existing space in Maryland, where space is available or to accept an offer from a manufacturer in Taiwan. Data concerning the decision are as follows:Expected annual sales of tools (in units)660,000Average selling price of tools$11Price quoted by Taiwanese company, in New Taiwanese Dollars (NTD)27,300Current exchange rate9,100 NTD = $1Variable manufacturing costs$2.85 per unitIncremental annual fixed manufacturing costs associated with the new product line$310,000Variable selling and distribution costsª$0.50 per unitAnnual fixed selling and distribution costsª$250,000 ªSelling and distribution costs are the same regardless of whether the tools are manufactured in Maryland or imported.

The objective of the question is to determine whether Yardwork Tools Corp should manufacture the new…

Answered: Yardwork Tools Corp manufactures garden…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 2CMA

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Yardwork Tools

Corp manufactures garden tools in a factory in Taneytown, Maryland. Recently, the company designed a collection of tools for professional use rather than consumer use. Management needs to make a good decision about whether to produce this line in their existing space in Maryland, where space is available or to accept an offer from a manufacturer in Taiwan. Data concerning the decision are as follows:

Expected annual sales of tools (in units)	660,000
Average selling price of tools	$11
Price quoted by Taiwanese company, in New Taiwanese Dollars (NTD)	27,300
Current exchange rate	9,100 NTD = $1
Variable manufacturing costs	$2.85 per unit
Incremental annual fixed manufacturing costs associated with the new product line	$310,000
Variable selling and distribution costsª	$0.50 per unit
Annual fixed selling and distribution costsª	$250,000