Question
Starship Inc. is in the process of measuring its financial performance. They are interested in the performance of the three divisions. From information collected, below
Starship Inc. is in the process of measuring its financial performance. They are interested in the
performance of the three divisions. From information collected, below are their financial results:
Divisions
Canada USA Europe
Sales $330,200 $477,500 $653,345
Operating income 55,045 97,482 1 24,445
Average investment 99,000 290,000 176,000
Required:
A. Assume Relic has sufficient excess capacity to produce Balboa's order. Calculate
the potential total contribution if the special order is accepted.
B. Assume Relic is operating at full capacity. Calculate the contribution margin per
unit and per machine hour. Should Relic produce the units for Balboa's special
order instead of wager or gripper.
C. What if Relic is operating at 95% of full capacity. What would be the opportunity
cost would if Balboa's special order is accepted.
D. If Relic is actually operating at 95% of full capacity but they have opportunity to
rent additional machines for $35,000 to produce Balboa's special order. Calculate
its effect on Relic's profit If they accept the special order.
E. What advice would you provide to Relic's stakeholders whether they have
capacity or not about taking the special order?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started