Answered step by step
Verified Expert Solution
Question
1 Approved Answer
As per the recent Annual Report of Luboh P/L the following Income Statement report (partial) was extracted below for the model MX-3405 parts. Luboh P/L
As per the recent Annual Report of Luboh P/L the following Income Statement report (partial) was extracted below for the model MX-3405 parts. Luboh P/L sells each computer for $3,500. (250 MX-3405motherboards) $ 875,000 Revenue Expenses: Hard-drive Super-Fans RAM GPU Direct labour $ 220,000 $ 16,500 $ 21,500 $ 18,500 $ 95,000 $375,000 Fixed expenses Profit before tax $ 746,500 $ 128,500 Fixed expenses include, rent, salary for technicians and marketing. Rent, depreciation and rates $ 156,000 Salary for two technicians* $ 204,000 Marketing $ 15,000 $ 375,000 *$114,000 of Salary and marketing of $15,000 are avoidable if manufacturing is terminated for one year. Required a) Due to COVID-19, many people around the globe are staying home and there is a huge demand for gaming computers. As a result Luboh P/L can only purchase parts enough for 175 motherboards. All existing variable cost rates and fixed cost remain the same. Should Luboh P/L continue producing the motherboards this year? Show all calculations and explain why it should keep producing or terminate the business. b) Recently a computer parts manufacturer in India contacted Luboh P/L and offered the same standard parts per gaming computer for $2,250 each. Due to exceeding demand they can only supply parts enough for 60 computers in total. Advise Luboh P/L whether to accept this offer on financial basis. c) Outline other qualitative impacts on the business resulting from part b) above
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started