3. Walton Corporation makes and sells state-of-the-art electronics products. One of its segments produces The Math...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
3. Walton Corporation makes and sells state-of-the-art electronics products. One of its segments produces The Math Machine, an inexpensive calculator. The company's chief accountant recently prepared the following income statement showing annual revenues and expenses associated with the segment's operating activities. The relevant range for the production and sale of the calculators is between 34,000 and 72,000 units per year. Revenue (45,000 units × $11.00) Unit-level variable costs Materials cost (45,000 × $3.00) Labor cost (45,000 × $2.00) Manufacturing overhead (45,000 x $0.30) Shipping and handling (45,000 $0.25) Sales commissions (45,000 $2.00) Contribution margin Fixed expenses Advertising costs Salary of production supervisor Allocated company-wide facility-level expenses Net loss $ 495,000 (135,000) (90,000) (13,500) (11,250) (90,000) 155,250 (31,000) (67,000) (83,000) $ (25,750) Required 1. a. A large discount store has approached the owner of Walton about buying 7,000 calculators. It would replace The Math Machine's label with its own logo to avoid affecting Walton's existing customers. Because the offer was made directly to the owner, no sales commissions on the transaction would be involved, but the discount store is willing to pay only $5.80 per calculator. Calculate the contribution margin from the special order. Based on quantitative factors alone, should Walton accept the special order? 2. Walton has an opportunity to buy the 45,000 calculators it currently makes from a reliable competing manufacturer for $6.50 each. The product meets Walton's quality standards. Walton could continue to use its own logo, advertising program, and sales force to distribute the products. Calculate the total cost for Walton to make and buy the 45,000 calculators. Should Walton buy the calculators or continue to make them? 3. Assume same facts as 2. If the calculators are purchased from external source another product, 3D Picture can be produced. Revenues from the new product would be $ 250,000 for sales of 500 units. The variable manufacturing cost would be $125 per unit and sales commission would be $5 per unit with shipping cost of $0.85 per unit. Should Walton purchase or make the calculators. 4. Western Classics Publishing Company produces updated versions of literary classics targeted for children. The unit-related cost of producing books is $2.50, and Western Classics sells its books for $9.50 each. Reading Ready Publishing has asked the company to produce 10,000 copies of a book for $7.50. Western Classics has a total capacity of 250,000. In addition, to complete the special order, Western Classics will have to purchase an additional special-purpose machine that will cost $8,000. Required: Assume that existing demand for Western Classics's children's classics is 247,000 units and that the special order has to be either taken in full or rejected. Prepare an analysis that indicates whether or not the special order should be accepted. 3. Walton Corporation makes and sells state-of-the-art electronics products. One of its segments produces The Math Machine, an inexpensive calculator. The company's chief accountant recently prepared the following income statement showing annual revenues and expenses associated with the segment's operating activities. The relevant range for the production and sale of the calculators is between 34,000 and 72,000 units per year. Revenue (45,000 units × $11.00) Unit-level variable costs Materials cost (45,000 × $3.00) Labor cost (45,000 × $2.00) Manufacturing overhead (45,000 x $0.30) Shipping and handling (45,000 $0.25) Sales commissions (45,000 $2.00) Contribution margin Fixed expenses Advertising costs Salary of production supervisor Allocated company-wide facility-level expenses Net loss $ 495,000 (135,000) (90,000) (13,500) (11,250) (90,000) 155,250 (31,000) (67,000) (83,000) $ (25,750) Required 1. a. A large discount store has approached the owner of Walton about buying 7,000 calculators. It would replace The Math Machine's label with its own logo to avoid affecting Walton's existing customers. Because the offer was made directly to the owner, no sales commissions on the transaction would be involved, but the discount store is willing to pay only $5.80 per calculator. Calculate the contribution margin from the special order. Based on quantitative factors alone, should Walton accept the special order? 2. Walton has an opportunity to buy the 45,000 calculators it currently makes from a reliable competing manufacturer for $6.50 each. The product meets Walton's quality standards. Walton could continue to use its own logo, advertising program, and sales force to distribute the products. Calculate the total cost for Walton to make and buy the 45,000 calculators. Should Walton buy the calculators or continue to make them? 3. Assume same facts as 2. If the calculators are purchased from external source another product, 3D Picture can be produced. Revenues from the new product would be $ 250,000 for sales of 500 units. The variable manufacturing cost would be $125 per unit and sales commission would be $5 per unit with shipping cost of $0.85 per unit. Should Walton purchase or make the calculators. 4. Western Classics Publishing Company produces updated versions of literary classics targeted for children. The unit-related cost of producing books is $2.50, and Western Classics sells its books for $9.50 each. Reading Ready Publishing has asked the company to produce 10,000 copies of a book for $7.50. Western Classics has a total capacity of 250,000. In addition, to complete the special order, Western Classics will have to purchase an additional special-purpose machine that will cost $8,000. Required: Assume that existing demand for Western Classics's children's classics is 247,000 units and that the special order has to be either taken in full or rejected. Prepare an analysis that indicates whether or not the special order should be accepted.
Expert Answer:
Answer rating: 100% (QA)
Walton Corporation Answer 1 a Amount Sell price 580 Less Relevant costs Remarks Remarks Direct materials 300 Relevant It is a unit level cost so relev... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
The numbers in our worksheet look like this: 1000 You want them to look like this: $1,000.00 How can you accomplish this? Select Format>Money from the menu Click currency style button on the...
-
This question has several parts that must be completed sequentially. If you skip a part of the question, you will not receive any points for the skipped part, and you will not be able to come back to...
-
You are the managing Director of Multiple (PTY) Ltd, a company based in Angola. Multiple is looking to penetrate the Botswanan market and decides to do this via the acquisition of an already...
-
Segment Analysis Winston Sylvester Corporation is a brokerage and financial service company. The company recently provided information about its major business segments as follows (in millions):...
-
If the cost of an ocean container from China to Seattle is $3,500 and you can fit 250 units into the container, but on average you put in 200, what is the cost per unit that should be used within a...
-
Determine the condition of steam in the following cases : (a) At a pressure of 10 bar and \(200^{\circ} \mathrm{C}\). (b) At a pressure of 8 bar and specific volume of \(0.22 \mathrm{~m}^{3} /...
-
What evidence is protected from disclosure based on a claim of privilege?
-
Your roommate, Matt Mikan, contends that accounting contributes to most of the steps in managements decision- making process. Is your roommate correct? Explain.
-
Working required Unanswered Question 8 Correct Answer 0/200 pts Let f (x) be a function defined for all real numbers, such that f(3x-9) = f(x) for all R. If f(x) 5x2 +7 lim x2 = 20 2-x find (if it...
-
Joe and Jessie are married and have one dependent child, Lizzie. Lizzie is currently in college at State University. Joe works as a design engineer for a manufacturing firm while Jessie runs a craft...
-
Take balance sheet of any company and perform horizontal & vertical analysis
-
Show the relationship between the work breakdown structure (WBS) and project costs.
-
Justify what general factors you consider should be taken into account when recruiting salespeople for the positions described in the exercise. In particular, suggest how the performance of such...
-
How does the Mission System SEA differ from the Enabling System SEA?
-
Demonstrate use of the analytic hierarchy process (AHP) tool to select project suppliers.
-
What are the strategies that can be deployed to integrate project supply chains?
-
1. [35 points] A cycle is executed by 2 kg of R-22 in a piston-cylinder assembly. The cycle consists of the following internally reversible processes: 1-2 heat removal at constant pressure 2-3...
-
A certain Christmas tree ornament is a silver sphere having a diameter of 8.50 cm. Determine an object location for which the size of the reflected image is three-fourths the size of the object. Use...
-
Why is the investor of a callable bond exposed to reinvestment risk?
-
How do optional call provisions in a securitization differ from that of a call provision in a standard corporate bond?
-
Suppose that the following values for a RMBS are correct for each assumption: PSA Assumption Value of Security 192 112.10 194 111.80 200 111.20 202 111.05 210 110.70 Assuming that the value of the...
-
What is an account? What is a ledger?
-
Why are accounting systems called double entry?
-
Does debit always mean increase and credit always mean decrease?
Study smarter with the SolutionInn App