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Damico Company's Board Division manufactures an electronic control board that is widely used in high-end DVD players. The cost per control board is as follows:
Damico Company's Board Division manufactures an electronic control board that is widely used in high-end DVD players. The cost per control board is as follows: Variable cost per board $ 120 Fixed cost per board* 30 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Total cost per board $ 150 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- *Based on a capacity of 800,000 boards per year. Part of the Board Divisions output is sold to outside manufacturers of DVD players, and part is sold to Damico Companys Consumer Products Division, which produces a DVD player under the Damico name. The Board Division charges a selling price of $190 per control board for all sales, both internally and externally. The costs, revenues, and net operating income associated with the Consumer Products Divisions DVD player are given below: Selling price per player $ 580 Variable costs per player: Cost of the control board $ 190 Variable cost of other parts 230 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Total variable costs 420 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Contribution margin 160 Fixed costs per player* 85 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Net operating income per player $ 75 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- *Based on a capacity of 200,000 DVD players per year. The Consumer Products Division has an order from an overseas distributor for 5,000 DVD players. The distributor wants to pay only $400 per DVD player. Assume that both the Board Division and the Consumer Products Division have idle capacity. Under these conditions, would rejecting the $400 price be advantageous for the company as a whole, or would it result in the loss of potential profits? (Input the amount as a positive value. Omit the "$" sign in your response.) The company will (Click to select)gainlose potential contribution margin $ per DVD player if the overseas order is rejected
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