Question :
81. McAdd Industries considering whether to continue making part MPG 411 : 1197807
81. McAdd Industries is considering whether to continue making part MPG 411 or buying the part from a supplier. The supplier can sell the needed number of parts (47,000 projected) to McAdd for an amount that is above the company’s current cost to manufacture it. If McAdd decides to purchase the parts from its supplier, it will be able to reconfigure the manufacturing floor in order to allow increased production of 50 of its product for an increased contribution margin of $17,000 for the year. The old machine has a book value of $39,000, and can be sold for $4,000. Discuss this situation. What are the considerations?
82. Bianca Jewel Box Manufacturing received an offer from a nonprofit organization for a one-time purchase of 2,000 of its Model RYA18261 at $20 each for distribution to flood victims in the South. Full capacity at Bianca is 25,000 units. Bianca currently expects to make 20,000 units in the current year and based all estimates on that expectation. There will be no delivery costs for this special order. The average costs to Bianca to produce one Model RYA18261 are $27 each as shown. Should Bianca accept this special offer? Explain your decision.
83. The Lourdes Corporation manufactures fans. A newly-formed construction company in the area desires to buy up to 300 of their Model CSB3192 this year. Lourdes quoted them a price of $67 which covers all costs plus markon. The construction company has indicated that they will buy all the fans they need in the future from Lourdes Corporation if Lourdes will sell the fans for $60 each. Lourdes Corporation has the capacity to make the 300 fans above their usual production needs. Currently, Lourdes ships all of their production to companies in other parts of the country, but do not usually sell any locally. If the $60 offer covers all costs and allows a small markon, what other things should Lourdes consider before coming to a final decision?
84. Assume that the Venus Company, which now sells its product for $75 per unit, has an opportunity to sell 3,000 units in a foreign country for $54 a unit. The order will not affect its current domestic sales. Shipping costs of $9 a unit would be incurred on the order. Current variable manufacturing costs are $31 per unit manufactured. Variable selling and administrative costs are $14 per unit sold. Included in variable selling expenses is a sales commission of $1 per unit, which would not apply to the special order. Fixed manufacturing costs are $75,000 per year and fixed selling and administrative expenses are $45,000 per year. The company is now manufacturing and selling 5,000 units per year.1. Should the Venus Company take the order?2. What impact would the special order have on profits?
85. The following information relates to a one-time special order from a flood relief organization for 200 of its book bags at $8.50. Current manufacturing costs are as follows. Fixed manufacturing overhead is based on capacity of 4,500 units per year. Normal sales are 4,000 book bags per year. Only $0.46 of the selling costs will be incurred for this special order. What are the relevant costs regarding this special order? Pose one nonfinancial consideration regarding the acceptance or rejection of this special offer.
