Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Solomon Corporation makes and sells state-of-the-art electronics products. One of its segments produces The Math Machine, an inexpensive calculator. The company's chief accountant recently prepared

image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
Solomon Corporation makes and sells state-of-the-art electronics products. One of its segments produces The Math Machine, an inexpensive calculator. The company's chief accountant recently prepared the following income statement showing annual revenues and expenses associated with the segment's operating activities. The relevant range for the production and sale of the calculators is between 32,000 and 72,000 units per year Revenue (34,000 units $9) Unit-level variable costs $306,000 Materials cost (34,000x $2) Labor cost (34,000 x $1) Manufacturing overhead (34,000 $0.20) Shipping and handlipg (34,000 x $0.28) Sales commissions (14,000 $1) (68,000) (34,000) (6,800) 9,520) Contribution margin Fixed expenses 34,000) 153,680 Advertising costs Salary of production supervisor Allocated company wide facility-level expenses (29,000) (66, 000) 83,000 $ (24,320) Net loss Required a. A large discount store has approached the owner of Solomon about buying 7000 calculators. It would replace The Math Machine's label with its own logo to avold affecting Solomon'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 Solomon accept the special order? b-1. Solomon has an opportunity to buy the 34,000 calculators it currently makes from a reliable competing manufacturer for $4.80 each. The product meets Solomon's quality standards. Solomon could continue to use its own logo, advertising program, and sales force to distribute the products. Should Solomon buy the calculators or continue to make them? b-2. Calculate the total cost for Solomon to make and buy the 34,000 calculators. b-3. Should Solomon buy the calculators or continue to make them, If the volume of sales were increased to 72,000 units? calculetor divlsion is currently operating at a loss, should it be eliminated from the company's operations? Support your answer with appropriate computations. Specifically, by what amount would the segment's elmination lincrease or decrease profitabillity

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

Students also viewed these Accounting questions

Question

Explain the phrase price-led costing?

Answered: 1 week ago

Question

6. Name the six virtues, and one related strength for each.

Answered: 1 week ago