Russell Marks shook his head in disbelief at he and operations manager Tom Hanover reviewed the month's flexible budget performance report "How did you manage to make such a poor showing last month?" he asked Hanover, "You didn't meet your production schedule, and we have three customers who are unhappy about their missed delivery dates. Now we have this $375,000 unfavorable direct materials quantity variance, plus a $250,000 unfavorable direct labor efficiency variance. Tom, are you the right person for this job?" Tom reflected for a moment on how the month had gone. He recalled that workers had complained all month about machine breakdowns and slow response from the maintenance department One batch of products had to be thrown away because of materials defects that had been discovered after all the assembly was complete. Tom had been working hard to keep the plant running smoothly, but lately everything had gone wrong and he couldn't seem to find the cause. Russell interrupted Tom's thoughts. "Thank goodness for the $400,000 favorable direct materials price variance Brian generated by purchasing materials from that new supplier he found Without that, we would have been in even worse shape. You know, he's been saving us a lot of money over the last several months by seeking out new suppliers Maybe I should give me a bonus." Required a) Discuss how might Tom respond to Russell? b. Should Russell investigate further before he awards Brian a bonus? Why or why not? Portable Music Ltd manufactures portable MP3 music players at a per-unit cost of: The company sells each player for $199 and is presently operating at 75% of its capacity of 50,000 units per year. The company has received a special order at a price of $120 per unit from an e-retailer for 1,000 units per month for 1 year only. The units sold to the e-retailer would have a different cover from the company's regular players that would add an extra $5 per unit to direct materials. Portable Music Ltd would have to purchase a new machine for $80,000 to produce the new covers The machine will have no alternative use or residual value at the end of the year The sales by the e-retailer would have no impact on the company's regular sales, because of the different cover and markets involved. Required a) Should the company accept the special order? Explain. b) Determine what would be the impact on profits of accepting the order