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Integratlve Case 5-72 (Algo) Cost Estimatlon, CVP Analysls, and Declslon Making (LO 5.4, 5, 9) Luke Corporation produces a variety of products, each within their own division. Last yeor, the managers at Luke developed ond begon morketing o new chewing gum, Bubbs, to sell in vending mochines. The product, which sells for $6.15 per cose, hos not hod the morket success that monogers expected and the compony is considering dropping Bubbs. The product-line income statement for the post 12 months follows: All products ot Luke receive an allocotion of corporote overheod costs, which is computed as 5 percent of product revenue. The 5 percent rate is computed bosed on the most recent year's corporote cost as a percentage of revenue. Dots on corporste costs and revenues for the post two yeors follow: Roy O. Andre, the product monsger for Bubbs, is concerned about whether the product will be dropped by the compony and has employed you as of financial consultant to help with some onslysis. In oddition to the information given, Mr. Andre provides you with the following doto on product costs for Bubbs: Required: a. Bunk Stores has requested a quote for a specisl order of Bubbs. This order would not be subject to any corporate allocation (sond would not affect corporste costs). What is the minimum price Mr. Andre con offer Bunk without reducing profit any further? b. How many coses of Bubbs does Luke hove to sell in order to bresk even on the product? c. Suppose Luke hos a requirement that all products hove to esm 5 percent of soles (after tox and corporate allocations) or they will be dropped. How many cases of Bubbs does Mr. Andre need to sell to ovoid seeing Bubbs dropped? d. Assume oll costs and prices will be the some in the next year. If Luke drops Bubbs, how much will Luke's profits increase or decresse? Assume that fixed production costs can be svoided if Bubbs is dropped