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Stavos Company s Screen Division manufactures a standard screen for high - definition televisions ( HDTVs ) . The cost per screen is: Variable cost
Stavos Companys Screen Division manufactures a standard screen for highdefinition televisions HDTVs The cost per screen is:
Variable cost per screen $
Fixed cost per screen
Total cost per screen $
Based on a capacity of screens per year.
Part of the Screen Divisions output is sold to outside manufacturers of HDTVs and part is sold to Stavos Companys Quark Division, which produces an HDTV under its own name. The Screen Division charges $ per screen for all sales.
The net operating income associated with the Quark Divisions HDTV is computed as follows:
Selling price per unit $
Variable cost per unit:
Cost of the screen $
Variable cost of electronic parts
Total variable cost
Contribution margin
Fixed costs per unit
Net operating income per unit $
Based on a capacity of units per year.
The Quark Division has an order from an overseas source for HDTVs The overseas source wants to pay only $ per unit.
Required:
Assume the Quark Division has enough idle capacity to fill the unit order. Is the division likely to accept the $ price or to reject it
Assume both the Screen Division and the Quark Division have idle capacity. Under these conditions, what is the financial advantage disadvantage for the company as a whole on a per unit basis if the Quark Division rejects the $ price?
Assume the Quark Division has idle capacity but the Screen Division is operating at capacity and could sell all of its screens to outside manufacturers. Under these conditions, what is the financial advantage disadvantage for the company as a whole on a per unit basis if the Quark Division accepts the $ unit price?
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