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c. the last word of the sentence got cut off, it is profitability. Stuart Corporation makes and sells state-of-the-art electronics products. One of its segments
c. the last word of the sentence got cut off, it is profitability.
Stuart 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 33,000 and 73,000 units per year. Required a. A large discount store has approached the owner of Stuart about buying 4,000 calculators. It would replace The Math Machine's label with its own logo to avoid affecting Stuart'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 $5.30 per calculator. Calculate the contribution margin from the special order. Based on quantitative factors alone, should Stuart accept the special order? b-1. Stuart has an opportunity to buy the 35,000 calculators it currently makes from a reliable competing manufacturer for $4.70 each. The product meets Stuart's quality standards. Stuart could continue to use its own logo, advertising program, and sales force to distribute the products. Calculate the total cost for Stuart to make and buy the 35,000 calculators. b-2. Should Stuart buy the calculators or continue to make them? b-3. Should Stuart buy the calculators or continue to make them, if the volume of sales were increased to 73,000 units? c. Because the calculator division is currently operating at a loss, should it be eliminated from the company's operations? Support your answer with appropriate computations. Specifically, by what amount would the segment's elimination increase or decrease Step by Step Solution
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