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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 per screen Fixed cost per
Stavos Company's Screen Division manufactures a standard screen for high-definition televisions (HDTVs). The cost per screen is: Variable cost per screen Fixed cost per screen $ 117 32. $ 149 Total cost per screen *Based on a capacity of 820,000 screens per year. Part of the Screen Division's output is sold to outside manufacturers of HDTVs and part is sold to Stavos Company's Quark Division, which produces an HDTV under its own name. The Screen Division charges $186 per screen for all sales. The net operating income associated with the Quark Division's HDTV is computed as follows: Selling price per unit $ 581 Variable cost per unit: Cost of the screen $ 186 Variable cost of electronic parts 231 Total variable cost 417 Contribution margin 164. Fixed costs per unit 88* $ 76 Net operating income per unit "Based on a capacity of 190,000 units per year. The Quark Division has an order from an overseas source for 5,000 HDTVs. The overseas source wants to pay only $392 per unit. Required: 1. Assume the Quark Division has enough idle capacity to fill the 5,000-unit order. Is the division likely to accept the $392 price or to reject it? 2. 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 $392 price? 3. Assume the Quark Division has idle capacity but that 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 $392 unit price?
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