6. Potlatch Company manufactures sonars for fishing boats. Model 100 sells for $200. Potlatch produces and...

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6. Potlatch Company manufactures sonars for fishing boats. Model 100 sells for $200. Potlatch produces and sells 5,000 of them per year. Cost data are as follows: Variable manufacturing Variable marketing Fixed manufacturing Fixed marketing & admin $105.00 $5.00 $270,000 $140,000 Per unit Per unit Per year Per year A potential deal has come up for a one time sale of 25 units at a special price of $105 per unit. The marketing manager says that the sale will not negatively impact the company's regular sales activities, but it will require the normal amount of variable marketing costs. The production manager says that there's plenty of excess capacity and the deal will not impact fixed costs in any way. The controller points out, however, that because the incremental revenues are just equal to the incremental costs to fill the order, the deal will not have any impact on the bottom line whatsoever. Is the controller correct in his/her analysis? H 6. Potlatch Company manufactures sonars for fishing boats. Model 100 sells for $200. Potlatch produces and sells 5,000 of them per year. Cost data are as follows: Variable manufacturing Variable marketing Fixed manufacturing Fixed marketing & admin $105.00 $5.00 $270,000 $140,000 Per unit Per unit Per year Per year A potential deal has come up for a one time sale of 25 units at a special price of $105 per unit. The marketing manager says that the sale will not negatively impact the company's regular sales activities, but it will require the normal amount of variable marketing costs. The production manager says that there's plenty of excess capacity and the deal will not impact fixed costs in any way. The controller points out, however, that because the incremental revenues are just equal to the incremental costs to fill the order, the deal will not have any impact on the bottom line whatsoever. Is the controller correct in his/her analysis? H

Answer rating: 100% (QA)

Is the controller correct in their analysis No the controller is not entirely correct in their analysis While it is true that the incremental revenues ... View the full answer