Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Stavos Companys Screen Division manufactures a standard screen for high-definition televisions (HDTVs). The cost per screen is: Variable cost per screen $ 116 Fixed cost
Stavos Companys Screen Division manufactures a standard screen for high-definition televisions (HDTVs). The cost per screen is: Variable cost per screen $ 116 Fixed cost per screen 33* Total cost per screen $ 149 *Based on a capacity of 800,000 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 $185 per screen for all sales. The net operating income associated with the Quark Divisions HDTV is computed as follows: Selling price per unit $ 575 Variable cost per unit: Cost of the screen $ 185 Variable cost of electronic parts 232 Total variable cost 417 Contribution margin 158 Fixed costs per unit 88* Net operating income per unit $ 70 *Based on a capacity of 180,000 units per year. The Quark Division has an order from an overseas source for 4,900 HDTVs. The overseas source wants to pay only $401 per unit. Required: 1. Assume the Quark Division has enough idle capacity to fill the 4,900-unit order. Is the division likely to accept the $401 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 $401 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 $401 unit price
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