Fanning 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 33,000 and 69,000 units per year Revenue (37,000 units $10) $ 370,000 Unit level variable costs Materials cost (37,000 $2) (74,000 ) Labor cost (37,000 $2) (74,000 ) Manufacturing overhead (37,000 $0 30) (11,100 ) Shipping and handling (37,000 $0 30) (11,100 ) Sales commissions (37,000 $2) (74,000 ) Contribution margin 125,800 Fixed expenses Advertising costs (25,000 ) Salary of production supervisor (65,000 ) Allocated companywide facility level expenses (78,000 ) Net loss $ (42,200 ) Required a A large discount store has approached the owner of Fanning about buying 7,000 calculators It would replace The Math Machines label with its own logo to avoid affecting Fannings 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 10 per calculator Calculate the contribution margin from the special order Based on quantitative factors alone, should Fanning accept the special order b 1 Fanning has an opportunity to buy the 37,000 calculators it currently makes from a reliable competing manufacturer for $5 60 each The product meets Fannings quality standards Fanning could continue to use its own logo, advertising program, and sales force to distribute the products Should Fanning buy the calculators or continue to make them b 2 Calculate the total cost for Fanning to make and buy the 37,000 calculators b 3 Should Fanning buy the calculators or continue to make them, if the volume of sales were increased to 69,000 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

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Fanning 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

Fanning 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 33,000 and 69,000 units per year.


Revenue (37,000 units $10)	$	370,000
Unit-level variable costs
Materials cost (37,000 $2)		(74,000	)
Labor cost (37,000 $2)		(74,000	)
Manufacturing overhead (37,000 $0.30)		(11,100	)
Shipping and handling (37,000 $0.30)		(11,100	)
Sales commissions (37,000 $2)		(74,000	)
Contribution margin		125,800
Fixed expenses
Advertising costs		(25,000	)
Salary of production supervisor		(65,000	)
Allocated companywide facility-level expenses		(78,000	)
Net loss	$	(42,200	)

Required

a. A large discount store has approached the owner of Fanning about buying 7,000 calculators. It would replace The Math Machines label with its own logo to avoid affecting Fannings 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 $5.10 per calculator. Calculate the contribution margin from the special order. Based on quantitative factors alone, should Fanning accept the special order?
b-1. Fanning has an opportunity to buy the 37,000 calculators it currently makes from a reliable competing manufacturer for $5.60 each. The product meets Fannings quality standards. Fanning could continue to use its own logo, advertising program, and sales force to distribute the products. Should Fanning buy the calculators or continue to make them?
b-2. Calculate the total cost for Fanning to make and buy the 37,000 calculators.
b-3. Should Fanning buy the calculators or continue to make them, if the volume of sales were increased to 69,000 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?