Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Problem #4: Differential Analysis ( 18 points) Duarte Mfg. Corp. splits its manufacturing operations into profit centers by product line. One such profit. center manufactures

image text in transcribed
image text in transcribed
image text in transcribed
Problem \#4: Differential Analysis ( 18 points) Duarte Mfg. Corp. splits its manufacturing operations into profit centers by product line. One such profit. center manufactures a product, the PZ22, with production costs per unit based on a normal annual volume of 100,000 units are: The PZ22 is a tool used in plumbing and the manufacture of plastic products. It is sold to distributors at an average selling price of $100 per unit. The P222 incurs selling and administrative costs of $10 per unit plus $3,000,000 annually. The maximum capacity for PZ22 is 120,000 units annually to which all of the above cost rates are relevant. Duarte Mfg. Corp. has two offers for the PZ22 from companies that never purchased from Duarte in the past. 1) The first offer is from LeComte Company for 12,000 of standard Duarte units at $42 per unit. There is little likelihood that LeComte will purchase units in the future. 2) The second offer is from Martinez Corporation for 15,000 units at $35. Martinez is a potential new customer. To produce units for Martinez, Duarte would incur $30,000 of additional setup costs. Due to the special nature of the orders, Duarte Mfg. Company will only incur 50% of the relevant selling and administrative costs for both orders. The PZ22 product manager wants to reject both offers as the prices are below the production cost. a. Does Duarte Mfg. Corp. have sufficient excess capacity to consider both special orders? ( 2 points) Supporting Calculations Required: ACFI 430/530 Cost Accounting b. Identify the revenue and costs that are relevant to the special orders. Use the relevant data ACti 430/530 c. To be able to accept both orders, Duarte Mig. Company would need to give up an order from a small customer. Peixoto inc., that purchases 7,500 units at the normal selling price of $100 per unit. (4) Compute the total contribution margin that would be foregone if the Pelxoto Inc. order is dropped. Total Contribution Margin from Peixoto Inc, order ( 2 points) Supporting Calculations Required: (4) Compute the minimum selling price that Duarte Mfg. Company should accept from the Martinez Corporation special order to avoid a loss. Minimum Selling Price from Martinez Corporation special order ( 6 points)

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

Debunked An Auditor Reviews The 2020 Election And The Lessons Learned

Authors: Joseph Fried

1st Edition

1645720756, 978-1645720751

More Books

Students also viewed these Accounting questions

Question

a. What is the value of the parameter ?

Answered: 1 week ago