Exercise 23-14 Accept new business or not LO P7 Goshford Company produces a single product and has capacity to produce 110,000 units per month Costs to produce its current sales of 88,000 units follow. The regular selling price of the product is $128 per unit. Management is approached by a new customer who wants to purchase 22,000 units of the product for $9100 per unit. If the order is accepted, there will be no additional fixed manufacturing overhead and no additional fixed selling and administrative expenses. The customer is not in the company's regular selling territory, so there will be a $6.40 per unit shipping expense in addition to the regular variable selling and administrative expenses Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and administrative expense Fixed selling and administrative expens Totals Per Unit $12.50 15.00 13.00 17.50 17.00 15.ee 390.00 Costs at 88,000 Units $1,100,000 1,320,000 1,144,000 1,540,000 1,496,000 1,320,000 $ 7,920,000 Calculate the combined total net income if the company accepts the offer to sell additional units at the reduced price of $8100 per unit. Determine whether management should accept or reject the new business Answer is complete but not entirely correct. yuuy my YOYOUS VUU Net Income Accept or Reject Calculate the combined total net income if the company accepts the offer to sell additional units at the reduced price of $81.00 per unit. Normal Additional Volume Volume $ 11,264,000$ 1,782,000 Combined Total $13,046,000 275,000 330.000 286.000 Sales Costs and expenses: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling and admin. exp Fixed selling and admin. exp Variable manufacturing overhead Total costs and expenses Net income (loss) 1,100,000 1,320,000 1,144,000 1,540,000 1,496,000 1,320,000 374,000 1,375,000 1,650,000 1.430,000 1,540,000 1,870,000 1,320,000 140,800 9,325 800 $ 3,720,200 7.920,000 3,344,000 140,800 x 1,405,800 $ 376,200 $ Accept or Reject> Exercise 23-8 Income analysis of eliminating departments LO P4 Marinette Company makes several products, including canoes. The company has been experiencing losses from its canoe segment and is considering dropping that product line. The following information is available regarding its canoe segment MARINETTE COMPANY Income Statement-Canoe Segment Sales $2,700,000 Variable costs Direct materials $ 590,000 Direct labor 640,000 Variable overhead 440,000 Variable selling and administrative 270,000 Total variable costs 1,940,000 Contribution margin 760,000 Fixed costs Direct 515,000 Indirect 440,000 Total fixed costs 955,000 Net Income $(195,000) 1. If canoes are discontinued, calculate the net income lost or gained 2. Should management discontinue the manufacturing of canoes? If canoes are discontinued, calculate the net income lost or gained. (Leave no cells blank. Ente Keep the department Eliminate the department Sales Expenses: Total expenses Net income (loss) $ 0 $ Required 2 >
