Blue Jay Products makes Ever Blue, which is used to fertilize hydrangeas and keep their blossoms blue.
Question:
Blue Jay Products makes Ever Blue, which is used to fertilize hydrangeas and keep their blossoms blue. The company usually sells through a distribution network for $15 per five-pound bag. Normal volumes are 5,000 bags per year. The costs for normal production are in the table below.
REQUIRED:
a. Calculate the current breakeven volume in bags.
b. Calculate the margin of safety.
c. QRC Productions approaches Blue Jay with an offer to buy 2,500 bags at a reduced price of $10.50. QRC would be selling to many of the same markets Blue Jay now serves. Using incremental analysis, does it make sense for Blue Jay to take this special order? Why or why not?
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Step by Step Answer:
a The contribution margin per bag is 1500 850 650 The breakeven volume can be calculated as Breakeve...View the full answer
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