Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Monty Co. manufactures three different models of colour plasma screens: PS1, PS2, and PS3. Data on the three models is presented below: Selling price Unit
Monty Co. manufactures three different models of colour plasma screens: PS1, PS2, and PS3. Data on the three models is presented below: Selling price Unit variable cost Annual production units Machine-hours per unit Avoidable fixed costs, if product line is eliminated PS1 PS2 $360 $510 $228 $342 4,690 3,400 6 12 $49,000 $41,900 PS3 $490 $346 4,130 8 $57,200 Monty's production capacity is 91,876 machine-hours per year. Chiyo Co. has offered to purchase 4,720 units of a simpler version of PS3 for $469. Monty estimates that this version of the PS3 would result in variable costs of $336 per unit to manufacture and 7 machine hours per unit, but an additional fixed cost of $62,200 for a new assembly machine. The order has to be either taken in full or rejected totally. If Monty takes the special order, it will not produce and sell PS3 to compete with Chiyo. Compute the profitability index for each model and rank the order of priority for the models to be produced. (Round answers to 2 decimal places, e.g. 15.25.) Pofitability index PS1 PS2 PS3 Given the machine hour constraint, for which model should production be reduced and by how many units? PS2 Monty should reduce by units If Monty can purchase additional machine hours from another plant, how much would Monty be willing to pay to meet its production requirement? Monty would be willing to pay $ Should Monty accept the special order from Chiyo? should Monty accept the special order. What is the incremental operating income/loss for accepting this order? Incremental Operating Income / (Loss) $
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started