Question
Benson Corporation makes and sells state-of-the-art electronics products. One of its segments produces The Math Machine, an inexpensive calculator. The companys chief accountant recently prepared
Benson Corporation makes and sells state-of-the-art electronics products. One of its segments produces The Math Machine, an inexpensive calculator. The companys chief accountant recently prepared the following income statement showing annual revenues and expenses associated with the segments operating activities. The relevant range for the production and sale of the calculators is between 35,000 and 67,000 units per year.
Revenue (38,000 units $9) | $ | 342,000 | |
Unit-level variable costs | |||
Materials cost (38,000 $3) | (114,000 | ) | |
Labor cost (38,000 $1) | (38,000 | ) | |
Manufacturing overhead (38,000 $0.60) | (22,800 | ) | |
Shipping and handling (38,000 $0.33) | (12,540 | ) | |
Sales commissions (38,000 $1) | (38,000 | ) | |
Contribution margin | 116,660 | ||
Fixed expenses | |||
Advertising costs | (23,000 | ) | |
Salary of production supervisor | (63,000 | ) | |
Allocated company wide facility-level expenses | (76,000 | ) | |
Net loss | $ | (45,340 | ) |
Required
a. A large discount store has approached the owner of Benson about buying 6,000 calculators. It would replace The Math Machines label with its own logo to avoid affecting Bensons 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 $5.20 per calculator. Calculate the contribution margin from the special order. Based on quantitative factors alone, should Benson accept the special order?
b-1. Benson has an opportunity to buy the 38,000 calculators it currently makes from a reliable competing manufacturer for $5.90 each. The product meets Bensons quality standards. Benson could continue to use its own logo, advertising program, and sales force to distribute the products. Should Benson buy the calculators or continue to make them?
b-2. Calculate the total cost for Benson to make and buy the 38,000 calculators.
b-3. Should Benson buy the calculators or continue to make them, if the volume of sales were increased to 67,000 units?
c. Because the calculator division is currently operating at a loss, should it be eliminated from the companys operations? Support your answer with appropriate computations. Specifically, by what amount would the segments elimination increase or decrease profitability?
Complete this question by entering your answers in the tabs below.
Required A
Required B1
Required B2
Required B3
Required C
A large discount store has approached the owner of Benson about buying 6,000 calculators. It would replace The Math Machines label with its own logo to avoid affecting Bensons 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 $5.20 per calculator. Calculate the contribution margin from the special order. Based on quantitative factors alone, should Benson accept the special order? (Negative amounts should be indicated by a minus sign.)
Show less
|
Complete this question by entering your answers in the tabs below.
Required A
Required B1
Required B2
Required B3
Required C
Benson has an opportunity to buy the 38,000 calculators it currently makes from a reliable competing manufacturer for $5.90 each. The product meets Bensons quality standards. Benson could continue to use its own logo, advertising program, and sales force to distribute the products. Should Benson buy the calculators or continue to make them?
|
Complete this question by entering your answers in the tabs below.
Required A
Required B1
Required B2
Required B3
Required C
Calculate the total cost for Benson to make and buy the 38,000 calculators.
|
Complete this question by entering your answers in the tabs below.
Required A
Required B1
Required B2
Required B3
Required C
Should Benson buy the calculators or continue to make them, if the volume of sales were increased to 67,000 units?
|
Complete this question by entering your answers in the tabs below.
Required A
Required B1
Required B2
Required B3
Required C
Because the calculator division is currently operating at a loss, should it be eliminated from the companys operations? Support your answer with appropriate computations. Specifically, by what amount would the segments elimination increase or decrease profitability? (Negative amounts should be indicated by a minus sign.)
|
please show work and answer in the above format.
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