4 Part 2 of 3 1.28 points Required information Problem 14-45 Special Order; Financial and Production Considerations (LO 14-4, 14-5) [The following information applies to the questions displayed below.] Jupiter Corporation manufactures skateboards. Several weeks ago, the firm received a special-order inquiry from Venus, Inc. Venus desires to market a skateboard similar to one of Jupiter's and has offered to purchase 11,000 units if the order can be completed in three months. The cost data for Jupiter's model no. 43 skateboard follow. eBook Print References Direct material Direct labor: 0.25 hours at $9.00 Total manufacturing overhead: 0.5 hours at $20 Total $ 8.20 2.25 10.00 $20.45 Additional data: The normal selling price of model no. 43 is $26.50; however, Venus has offered Jupiter only $15.75 because of the large quantity it is willing to purchase. Venus requires a modification of the design that will allow a $2.10 reduction in direct-material cost. Jupiter's production supervisor notes that the company will incur $3,700 in additional setup costs and will have to purchase a $2,400 special device to manufacture these units. The device will be discarded once the special order is completed. Total manufacturing overhead costs are applied to production at the rate of $20 per machine hour. This figure is based, in part, on budgeted yearly fixed overhead of $750,000 and planned production activity of 60,000 machine hours (5,000 per month). Jupiter will allocate $1,800 of existing fixed administrative costs to the order as "... part of the cost of doing business." 4 Jupiter will allocate $1,800 of existing fixed administrative costs to the order as "... part of the cost of doing business." Part 2 of 3 1.28 points Problem 14-45 Part 2 2-a. Assume that Jupiter's current production activity consumes 70 percent of planned machine-hour activity. Calculate the current available machine-hours. 2-b. Can the company accept the order and meet Venus's deadline? eBook Print Complete this question by entering your answers in the tabs below. References Req 2A Req 2B Assume that Jupiter's current production activity consumes 70 percent of planned machine-hour activity. Calculate the current available machine-hours. Current available machine-hours < Req 2A Req 2B > 6 Tipton One-Stop Decorating sells paint and paint supplies, carpet, and wallpaper at a single-store location in suburban Des Moines. Although the company has been very profitable over the years, management has seen a significant decline in wallpaper sales and earnings. Much of this decline is attributable to the Internet and to companies that advertise deeply discounted prices in magazines and offer customers free shipping and toll-free telephone numbers. Recent figures follow. 1.28 points Paint and Supplies Carpeting Sales $380,000 $460,000 Wallpaper $140,000 Variable costs $228,000 $322,000 eBook Fixed costs Total costs 56,000 $284,000 75,000 $397,000 $ 112,000 45,000 $ 157,000 Print References Operating income (loss) $ 96,000 $ 63,000 $ (17,000) Tipton is studying whether to drop wallpaper because of the changing market and accompanying loss. If the line is dropped, the following changes are expected to occur: The vacated space will be remodeled at a cost of $12,400 and will be devoted to an expanded line of high-end carpet. Sales of carpet are expected to increase by $120,000, and the line's overall contribution margin ratio will rise by five percentage points. Tipton can cut wallpaper's fixed costs by 40 percent. Remaining fixed costs will continue to be incurred. Customers who purchased wallpaper often bought paint and paint supplies. Sales of paint and paint supplies are expected to fall by 20 percent. The firm will increase advertising expenditures by $25,000 to promote the expanded carpet line. Required: 1-a. Calculate the income or loss if Tipton closes its wallpaper operation. 1-b. Should Tipton close its wallpaper operation? 2. Assume that Tipton's wallpaper inventory at the time of the closure decision amounted to $23,700. How would you have treated this additional information in making the decision? 3. What advantages might Internet- and magazine-based firms have over Tipton that would allow these organizations to offer deeply discounted prices-prices far below what Tipton can offer? 1.28 6 points Required: 1-a. Calculate the income or loss if Tipton closes its wallpaper operation. 1-b. Should Tipton close its wallpaper operation? 2. Assume that Tipton's wallpaper inventory at the time of the closure decision amounted to $23,700. How would you have treated this additional information in making the decision? 3. What advantages might Internet- and magazine-based firms have over Tipton that would allow these organizations to offer deeply discounted prices-prices far below what Tipton can offer? eBook Print Complete this question by entering your answers in the tabs below. References Req 1A Req 1B Req 2 Req 3 Calculate the income or loss if Tipton closes its wallpaper operation. < Req 1A Req 1B > 1.32 7 points Casting Technology Resources (CTR) has purchased 10,000 pumps annually from Kobec, Inc. Because the price keeps increasing and reached $68.00 per unit last year, CTR's management has asked for an estimate of the cost of manufacturing the pump in CTR'S facilities. CTR makes stampings and castings and has little experience with products requiring assembly. The engineering, manufacturing, and accounting departments have prepared a report for management that includes the following estimate for an assembly run of 10,000 pumps. Additional production employees would be hired to manufacture the pumps but not additional equipment, space, or supervision would be needed. The report states that total costs for 10,000 units are estimated at $957,000, or $95.70 per unit. The current purchase price is $68.00 per unit, so the report recommends continued purchase of the product. Components (outside purchases) eBook Print References $120,000 Assembly labor" 300,000 Manufacturing overhead* 450,000 General and administrative overhead+ 87,000 Total costs $957,000 *Assembly labor consists of hourly production workers. *Manufacturing overhead is applied to products on a direct-labor-dollar basis. Variable-overhead costs vary closely with direct-labor dollars. Fixed overhead Variable overhead Manufacturing-overhead rate 50% of direct-labor dollars 100% of direct-labor dollars 150% of direct-labor dollars *General and administrative overhead is applied at 10 percent of the total cost of material (or components), assembly labor, and manufacturing overhead. 1.32 7 points *General and administrative overhead is applied at 10 percent of the total cost of material (or components), assembly labor, and manufacturing overhead. Required: 1-a. Was the analysis prepared by Casting Technology Resources' engineering, manufacturing, and accounting departments correct? 1-b. Calculate the relevant cost per unit. eBook Complete this question by entering your answers in the tabs below. Print References Req 1A Req 1B Was the analysis prepared by Casting Technology Resources' engineering, manufacturing, and accounting departments correct? Was the analysis correct? < Req 1A Req 1B >