Luke Corporation produces a variety of products, each within their own division. Last year, the managers at Luke developed and began marketing a new chewing gum, Bubbs, to sell in vending machines. The product, which sells for $6.05 per case, has not had the market success that managers expected and the company is considering dropping Bubbs. The product-line income statement for the past 12 months follows: Revenue $ 14,706,150 Costs Manufacturing costs $ 14,448,395 Allocated corporate costs (@5%) 735,308 15,183,703 Product-line margin $ (477,553 ) Allowance for tax (@20%) 95,510 Product-line profit (loss) $ (382,043 ) All products at Luke receive an allocation of corporate overhead costs, which is computed as 5 percent of product revenue. The 5 percent rate is computed based on the most recent years corporate cost as a percentage of revenue. Data on corporate costs and revenues for the past two years follow: Corporate Revenue Corporate Overhead Costs Most recent year $ 122,750,000 $ 6,137,500 Previous year 77,800,000 5,180,065 Roy O. Andre, the product manager for Bubbs, is concerned about whether the product will be dropped by the company and has employed you as a financial consultant to help with some analysis. In addition to the information given, Mr. Andre provides you with the following data on product costs for Bubbs: Month Cases Production Costs 1 223,000 $1,165,840 2 225,200 1,187,340 3 222,900 1,195,993 4 244,000 1,211,535 5 224,500 1,213,839 6 253,000 1,234,685 7 228,250 1,209,711 8 255,200 1,252,786 9 246,800 1,251,238 10 260,650 1,263,337 11 258,200 1,267,772 12 267,200 1,298,463 Required: a. Bunk Stores has requested a quote for a special order of Bubbs. This order would not be subject to any corporate allocation (and would not affect corporate costs). What is the minimum price Mr. Andre can offer Bunk without reducing profit any further? b. How many cases of Bubbs does Luke have to sell in order to break even on the product? c. Suppose Luke has a requirement that all products have to earn 5 percent of sales (after tax and corporate allocations) or they will be dropped. How many cases of Bubbs does Mr. Andre need to sell to avoid seeing Bubbs dropped? d. Assume all costs and prices will be the same in the next year. If Luke drops Bubbs, how much will Lukes profits increase or decrease? Assume that fixed production costs can be avoided if Bubbs is dropped.

224,5DD Luke Corporation produces a variety of products, each within their own division. Last year, the managers at Lulce developed and began marketing a new chewing gum, Bubbs, to sell in vending machines. The product, which sells for $6.05 per case, has not had the market success that managers expected and the company is considering dropping Bubbs. The product-line Income statement for the past 12 months follows: Rere $ 14,706,150 Manufacturing conta 5 14,448,399 Allocated corporate cout 1451) 735.30 19,183,703 Prodheline margin 5 (477,553) AlloC for tax (201) 95,510 Product-line Prefit | lau) 5 382,043) All products at Luke receive an allocation of corporate overhead costs, which is computed as 5 percent of product revenue. Thes percent rate is computed based on the most recent year's corporate cost as a percentage of revenue. Data on corporate costs and revenues for the past two years follow: Corporate Revenue Corporate Overhead Coats Most recent year $ 122,750,000 5 6, 137,500 Previous year 77,000,000 5,180,065 Roy O. Andre, the product manager for Bubbs, is concerned about whether the product will be dropped by the company and has employed you as a financial consultant to help with some analysis. In addition to the information given, Mr. Andre provides you with the following data on product costs for Bubbs: Month Production Conte 223,ODD 51,165,540 2 225, 200 1,107,340 222,900 1,195,93 24.0DD 1,211,533 1,213,30 253,000 1,234,6 223,250 200, "ii 255,200 1,252,70 246,00 1,251,230 260,650 1,263,337 253,200 1,267,772 267,200 10 11 12 Required: a. Bunk Stores has requested a quote for a special order of Bubbs. This order would not be subject to any corporate allocation (and would not affect corporate costs. What is the minimum price Mr. Andre can offer Bunk without reducing profit any further? b. How many cases of Bubbs does Luke have to sell in order to break even on the product? Suppose Luke has a requirement that all products have to earn 5 percent of sales after tax and corporate allocations) or they will be dropped. How many cases of Bubbs does Mr. Andre need to sell to avoid seeing Bubbs dropped? d. Assume al costs and prices will be the same in the next year. If Luke drops Bubbs, how much will Luke's profits increase or decrease? Assume that fixed production costs can be avoided if Bubbs is dropped Complete this question by entering your answers in the tabs below. Required A Required B Required Required Bunk Stores has requested a quote for a special order of Bubbs. This order would not be subject to any corporate allocation (and would not affect corporate costs). What is the minimum price Mr. Andre can offer Bunk without reducing profit any further? [Round your answer to 2 decimal places.[i.e., 32.21) Minimum price $ 5.07 percase Required A Required B > 224,5DD Luke Corporation produces a variety of products, each within their own division. Last year, the managers at Lulce developed and began marketing a new chewing gum, Bubbs, to sell in vending machines. The product, which sells for $6.05 per case, has not had the market success that managers expected and the company is considering dropping Bubbs. The product-line Income statement for the past 12 months follows: Rere $ 14,706,150 Manufacturing conta 5 14,448,399 Allocated corporate cout 1451) 735.30 19,183,703 Prodheline margin 5 (477,553) AlloC for tax (201) 95,510 Product-line Prefit | lau) 5 382,043) All products at Luke receive an allocation of corporate overhead costs, which is computed as 5 percent of product revenue. Thes percent rate is computed based on the most recent year's corporate cost as a percentage of revenue. Data on corporate costs and revenues for the past two years follow: Corporate Revenue Corporate Overhead Coats Most recent year $ 122,750,000 5 6, 137,500 Previous year 77,000,000 5,180,065 Roy O. Andre, the product manager for Bubbs, is concerned about whether the product will be dropped by the company and has employed you as a financial consultant to help with some analysis. In addition to the information given, Mr. Andre provides you with the following data on product costs for Bubbs: Month Production Conte 223,ODD 51,165,540 2 225, 200 1,107,340 222,900 1,195,93 24.0DD 1,211,533 1,213,30 253,000 1,234,6 223,250 200, "ii 255,200 1,252,70 246,00 1,251,230 260,650 1,263,337 253,200 1,267,772 267,200 10 11 12 Required: a. Bunk Stores has requested a quote for a special order of Bubbs. This order would not be subject to any corporate allocation (and would not affect corporate costs. What is the minimum price Mr. Andre can offer Bunk without reducing profit any further? b. How many cases of Bubbs does Luke have to sell in order to break even on the product? Suppose Luke has a requirement that all products have to earn 5 percent of sales after tax and corporate allocations) or they will be dropped. How many cases of Bubbs does Mr. Andre need to sell to avoid seeing Bubbs dropped? d. Assume al costs and prices will be the same in the next year. If Luke drops Bubbs, how much will Luke's profits increase or decrease? Assume that fixed production costs can be avoided if Bubbs is dropped Complete this question by entering your answers in the tabs below. Required A Required B Required Required Bunk Stores has requested a quote for a special order of Bubbs. This order would not be subject to any corporate allocation (and would not affect corporate costs). What is the minimum price Mr. Andre can offer Bunk without reducing profit any further? [Round your answer to 2 decimal places.[i.e., 32.21) Minimum price $ 5.07 percase Required A Required B >