Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Mohave Corporation makes several varieties of beach umbrellas and accessories. It has been approached by a company called Lost Mine Industries about producing a special

image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
Mohave Corporation makes several varieties of beach umbrellas and accessories. It has been approached by a company called Lost Mine Industries about producing a special order for a custom umbrella called the Ultimate Shade (US). The special-order umbrellas with the Lost Mine Company logo would be distributed to participants at an upcoming convention sponsored by Lost Mine: Lost Mine offered to buy 1,600 US umbrellas at a price of $12 each. Mohave currently has the excess capacity necessary to accept the offer. The following information is related to the production of the US umbrella: Required: 1. Compute the incremental profit (or loss) from accepting the special order. 2. Should Mohave accept the special order? 3. Suppose the special order had been to purchase 2,100 umbrellas for $8.00 each. Aecompute the incremental profit (or loss) from accepting the special order under this scenario. 4. Assume Mohave is operating at full capacity, Calculate the speciol-order price per unit at which Mohave would be indifferent between accepting of rejecting the special order. Complete this question by entering your answers in the tabs below. Compute the incremental profit (or loss) from accepting the speciat order. Mohave Corporation is considering outsourcing production of the umbrella tote bag included with some of its products. The company has recelved a bid from a suppller in Vietnam to produce 9,400 units per year for $8.00 each. Mohave the following information about the cost of producing tote bags: Mohave determined all variable costs could be eliminated by outsourcing the tote bag5, while 70 percent of the fixed overhead cost is unavoidable. At this time, Mohave has no specific use in mind for the space currently dedicated to producing the tote bags. Required: 1. Compute the difference in cost between making and buying the umbrella tote bag. 2. Based strictly on the incremental analysis, should Mohave buy the tote bags or continue to make them? 3-a. Suppose the space Mohave currently uses to make the bags could be utilized by a new preduct line that would generate $6,000 in annual profits. Recompute the difference in cost between making and buying the umbrella tote bag. 3.b. Does this change your recommendation to Mohave? Complete this question by entering your answers in the tabs below. Compute the difference in cost between making and buying the umbrella tote bag. Mohave Corporation is considering eliminating a product from its Sand Trap line of beach umbrellas. This collection is aimed at people who spend time on the beach or have an outdoor patio near the beach. Two products, the Indigo and Verde umbrellas, have impressive sales. However, sales for the Azul model have been dismal. Mohave's information related to the Sand Trap line is shown as follows. Mohave determined that eliminating the Azul model would cause sales of the Indigo and Verde models to increase by 10 percent and 15 percent, respectively. Variable costs for these two models would increase proportionately. Although the direct fixed costs could be eliminated, the common fixed costs are unavoidable. The common fixed costs would be redistributed to the remaining two products. Required: 1-a. Complete the table given below, assuming Mohave Corporation drops the Azul line. 1-b. Will Mohave's net operating income increase or decrease if the Azul model is eliminated? By how much? 2. Should Mohave drop the Azul model? 3-a. Complete the table given below assuming that Mohave had no direct fixed overhead in its production information and the entire $51,000 of fixed cost was common fixed cost. 3.b. Should Mohave drop the Azui model? 3.c. What is the increase or decrease in the net operating income of Mohave? Complete this question by entering your answers in the tabs below. Complete the table given below, assuming Mohave Corporation drogs the Axul line. Required: 1-a. Complete the table given below, assuming Mohave Corporation drops the Azul line. 1-b. Will Mohave's net operating income increase or decrease if the Azul model is eliminated? By how much? 2. Should Mohave drop the Azul model? 3-a. Complete the table given below assuming that Mohave had no direct fixed overhead in its production information and the entire $51,000 of fixed cost was common fixed cost. 3-b. Should Mohave drop the Azul model? 3-c. What is the increase or decrease in the net operating income of Mohave? Complete this question by entering your answers in the tabs below. Complete the tabie given below, assuming Mohave Corporation drops the Azul line. Note: Do not round intermediate calculatiohis: Round Common Fxed Costs to the nearest whole dollar

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Alpine Cupcakes Audit Case With Data Analytics

Authors: Carol Callaway Dee, Mary P.Mindak

2nd Edition

1618533231, 978-1618533234

More Books

Students also viewed these Accounting questions