Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Print Fine Company produces and sells ribbon cartridges for electronic printers. The ribbons are sold to computer dealers for $5.35 each. The firm controller has

Print Fine Company produces and sells ribbon cartridges for electronic printers. The ribbons are sold to computer dealers for $5.35 each. The firm controller has determined the following costs are currently required for the ribbons:

Fixed costs per month are $27,000, of which 60% is manufacturing overhead.

Variable costs per ribbon:

Direct materials $2.00

Direct labor 0.40

Manufacturing overhead 0.35

Selling 0.05

The variable selling costs are freight charges incurred to ship the ribbons to the retail outlets. The firm has the capacity to produce 30,000 ribbons per month without working overtime, although the current production and sale level is only 25,000 ribbons.

An importer in china has offered to buy 8,000 ribbons at $4.75 each. The importer would pay 80% of the freight costs, but Print Fine estimates that additional selling and administrative expenses of $900 would be required with the offer. Assume that the firm can work overtime to produce any ribbons required in excess of its production capacity of 30,000. Direct labor costs for ribbons produced during overtime would increase by 40%, while direct marterials costs for ribbons produced during overtime would decline by 10% as a result of taking additional discount from the supplier.

Prepare a relevant analysis to evaluate the effect of this special order on Kirks profitability using the below template.

Item

Current Situation

Situation with the special order

Sales revenue

$

$

Direct materials

Direct labor

Variable overhead

Variable marketing and administrative

Contribution margin

$

$

Fixed Manufacturing

Fixed Marketing and Administrative

Operating profit

$

$

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_2

Step: 3

blur-text-image_3

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

Managerial accounting

Authors: ramji balakrishnan, k. s i varamakrishnan, Geoffrey b. sprin

1st edition

471467855, 978-0471467854

More Books

Students also viewed these Accounting questions