3 Luke Corporation produces a variety of products, each within their own division. Last year, the managers at Luke developed and began marketing a new chewing gum, Bubbs, to sell in vending machines. The product, which sells for $5.80 per case, has not had the market success that managers expected and the company is considering dropping Bubbs. The product-line income statement for the past 12 months follows: $14,698,650 Revenue Costs Manufacturing costs Allocated corporate costs (@5%) Product-line margin Allowance for tax (6203) Produet-line profit (1033) $ 14,445,895 734, 933 15,180,828 (482,178) 96,435 S (385, 743) w All products at Luke receive an allocation of corporate overhead costs, which is computed as 5 percent of product revenue. The 5 percent rate is computed based on the most recent year's corporate cost as a percentage of revenue. Data on corporate costs and revenues for the past two years follow: Most recent year Previous year Corporate Revenue Corporate Overhead Costs $ 117,750,000 $ 5,887,500 77,300,000 4,953, 105 MUSC recen year Previous year $ 1150 Uue 77,300,000 5,007, JUU 4,953, 105 3 Roy O. Andre, the product manager for Bubbs, is concerned about whether the product will be dropped by the company and has employed you as a financial consultant to help with some analysis. In addition to the information given, Mr. Andre provides you with the following data on product costs for Bubbs: 5 Month 1 olnts 6 No co o en we Cases 218,000 222,700 220,400 239,000 234,950 248,000 225,750 252,700 244,300 258, 150 255,700 264,700 Production Costs $1,158, 340 1,179,840 1,188, 493 1,204,035 1,206, 339 1,227,185 1,202,211 1,245, 286 1,243,738 1,255,837 1,260,272 1,290,963 Required: a. Bunk Stores has requested a quote for a special order of Bubbs. This order would not be subject to any corporate allocation (and would not affect corporate costs). What is the minimum price Mr. Andre can offer Bunk without reducing profit any further? b. How many cases of Bubbs does Luke have to sell in order to break even on the product? c. Suppose Luke has a requirement that all products have to earn 5 percent of sales (after tax and corporate allocations) or they will be dropped. How many cases of Bubbs does Mr. Andre need to sell to avoid seeing Bubbs dropped? d. Assume all costs and prices will be the same in the next year. If Luke drops Bubbs, how much will Luke's profits increase or decrease? Assume that fixed production costs can be avoided if Bubbs is dropped. 3 a. Bunk Stores has requested a quote for a special order of Bubbs. This order would not be subject to any corporate allocati- would not affect corporate costs). What is the minimum price Mr. Andre can offer Bunk without reducing profit any further? b. How many cases of Bubbs does Luke have to sell in order to break even on the product? c. Suppose Luke has a requirement that all products have to earn 5 percent of sales (after tax and corporate allocations) or ti dropped. How many cases of Bubbs does Mr. Andre need to sell to avoid seeing Bubbs dropped? d. Assume all costs and prices will be the same in the next year. If Luke drops Bubbs, how much will Luke's profits increase decrease? Assume that fixed production costs can be avoided if Bubbs is dropped. 15 points Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Bunk Stores has requested a quote for a special order of Bubbs. This order would not be subject to any corporate allocation (and would not affect corporate costs). What is the minimum price Mr. Andre can offer Bunk without reducing profit any further? (Round your answer to 2 decimal places.(i.e., 32.21)) Minimum price per case Required B > 3 Mequired. . a. Bunk Stores has requested a quote for a special order of Bubbs. This order would not be subject to any corporate allocation (an would not affect corporate costs). What is the minimum price Mr. Andre can offer Bunk without reducing profit any further? b. How many cases of Bubbs does Luke have to sell in order to break even on the product? c. Suppose Luke has a requirement that all products have to earn 5 percent of sales (after tax and corporate allocations) or they wi dropped. How many cases of Bubbs does Mr. Andre need to sell to avoid seeing Bubbs dropped? d. Assume all costs and prices will be the same in the next year. If Luke drops Bubbs, how much will Luke's profits increase or decrease? Assume that fixed production costs can be avoided if Bubbs is dropped. 5 Doints Complete this question by entering your answers in the tabs below. Required A Required B Required c Required D How many cases of Bubbs does Luke have to sell in order to break even on the product? (Round variable cost percentage to 2 decimal places, fixed costs to whole dollar amount and profit per case to 3 decimal places for intermediate calculations. Round your final answer up to the nearest whole unit.). Number of cases 3 a. Bunk Stores has requested a quote for a special order of Bubbs. This order would not be subject to any corporate allocat would not affect corporate costs). What is the minimum price Mr. Andre can offer Bunk without reducing profit any further? b. How many cases of Bubbs does Luke have to sell in order to break even on the product? c. Suppose Luke has a requirement that all products have to earn 5 percent of sales (after tax and corporate allocations) or dropped. How many cases of Bubbs does Mr. Andre need to sell to avoid seeing Bubbs dropped? d. Assume all costs and prices will be the same in the next year. If Luke drops Bubbs, how much will Luke's profits increase decrease? Assume that fixed production costs can be avoided if Bubbs is dropped. 15 points Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Assume all costs and prices will be the same in the next year. If Luke drops Bubbs, how much will Luke's profits increase or decrease? Assume that fixed production costs can be avoided if Bubbs is dropped. (Use variable cost percentage to 2 decimal places. Round intermediate calculations and final answer to nearest whole dollar amount. ) Profits