Problem 6-30A (Algo) Comprehensive problem including special order, outsourcing, and segment elimination decisions LO 6-2, 6-3, 6-4

Finch Corporation makes and sells state-of-the-art electronics products. One of its segments produces The Math Machine, an inexpensive calculator. The companys chief accountant recently prepared the following income statement showing annual revenues and expenses associated with the segments operating activities. The relevant range for the production and sale of the calculators is between 34,000 and 70,000 units per year.

Required

1. a. A large discount store has approached the owner of Finch about buying 8,000 calculators. It would replace The Math Machines label with its own logo to avoid affecting Finchs existing customers. Because the offer was made directly to the owner, no sales commissions on the transaction would be involved, but the discount store is willing to pay only $5.60 per calculator. Calculate the contribution margin from the special order. Based on quantitative factors alone, should Finch accept the special order?

2. b-1. Finch has an opportunity to buy the 38,000 calculators it currently makes from a reliable competing manufacturer for $6.30 each. The product meets Finchs quality standards. Finch could continue to use its own logo, advertising program, and sales force to distribute the products. Calculate the total cost for Finch to make and buy the 38,000 calculators.

3. b-2. Should Finch buy the calculators or continue to make them?

4. b-3. Should Finch buy the calculators or continue to make them, if the volume of sales were increased to 70,000 units?

5. c. Because the calculator division is currently operating at a loss, should it be eliminated from the companys operations? Support your answer with appropriate computations. Specifically, by what amount would the segments elimination increase or decrease profitability?

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$ 380,000 Revenue (38,000 units x $10.00) Unit-level variable costs Materials cost (38,000 x $3.00) Labor cost (38,000 x $2.00) Manufacturing overhead (38,000 x $0.20) Shipping and handling (38,000 $0.31) Sales commissions (38,000 x $1.00) Contribution margin Fixed expenses Advertising costs Salary of production supervisor Allocated company-wide facility-level expenses Net loss (114,000) (76,000) (7,600) (11,780) (38,000) 132,620 (26,000) (66,000) (79,000) $ (38, 380) Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B1 Required B2 Required B3 Required C A large discount store has approached the owner of Finch about buying 8,000 calculators. It would replace The Math Machine's label with its own logo to avoid affecting Finch's existing customers. Because the offer was made directly to the owner, no sales commissions on the transaction would be involved, but the discount store is willing to pay only $5.60 per calculator. Calculate the contribution margin from the special order. Based on quantitative factors alone, should Finch accept the special order? (Negative amounts should be indicated by a minus sign.) Show less 720 Contribution margin (loss) Should Finch accept the special order? $ Yes Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B1 Required B2 Required B3 Required C Finch has an opportunity to buy the 38,000 calculators it currently makes from a reliable competing manufacturer for $6.30 each. The product meets Finch's quality standards. Finch could continue to use its own logo, advertising program, and sales force to distribute the products. Calculate the total cost for Finch to make and buy the 38,000 calculators. Make Buy 394,180 X Total relevant cost $ 418,380 X $