Adams Corporation makes and sells state-of-the-art electronics products. One of its segments produces The Math Machine, an inexpensive calculator. The company's chief accountant recently prepared the following income statement showing annual revenues and expenses associated with the segment's operating activities. The relevant range for the production and sale of the calculators is between 31,000 and 65,000 units per year. Required a. A large discount store has approached the owner of Adams about buying 7,000 calculators. It would replace The Math Machine's label with its own logo to avoid affecting Adams's existing customers. Because the offer was made directly to the owner, no sales commissions on the transaction would be involved, but the discount store is willing to pay only $6.00 per calculator. Calculate the contribution margin from the special order. Based on quantitative factors alone, should Adams accept the special order? b-1. Adams has an opportunity to buy the 41,000 calculators it currently makes from a reliable competing manufacturer for $6.30 each. The product meets Adams's quality standards. Adams could continue to use its own logo, advertising program, and sales force to distribute the products. Calculate the total cost for Adams to make and buy the 41,000 calculators. b-2. Should Adams buy the calculators or continue to make them? b-3. Should Adams buy the calculators or continue to make them, if the volume of sales were increased to 65,000 units? c. Because the calculator division is currently operating at a loss, should it be eliminated from the company's operations? Specifically, by what amount would the segment's elimination increase or decrease profitability? A large discount store has approached the owner of Adams about buying 7,000 calculators. It would replace The Math Machine's label with its own logo to avoid affecting Adams's existing customers. Because the offer was made directly to the owner, no sales commissions on the transaction would be involved, but the discount store is willing to pay only $6.00 per calculator. Calculate the contribution margin from the special order. Based on quantitative factors alone, should Adams accept the special order? (Negative amounts should be indicated by a minus sign.) Adams has an opportunity to buy the 41,000 calculators it currently makes from a reliable competing manufacturer for $6.30 each. The product meets Adams's quality standards. Adams could continue to use its own logo, advertising program, and sales force to distribute the products. Calculate the total cost for Adams to make and buy the 41,000 calculators. Should Adams buy the calculators or continue to make them? Should Adams buy the calculators or continue to make them, if the volume of sales were increased to 65,000 units? Because the calculator division is currently operating at a loss, should it be eliminated from the company's operations? Specifically, by what amount would the segment's elimination increase or decrease profitability? (Negative amounts should be indicated by a minus sign.)
