Fairmount Travel Gear produces backpacks and sells them to vendors who sell them under their own...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Fairmount Travel Gear produces backpacks and sells them to vendors who sell them under their own label. The cost of one of its backpacks follows. Materials Labor $19.10 13.10 Variable overhead 6.10 Fixed overhead ($3,273,100 per year; 461,000 units per year) 7.10 Total $45.40 Riverside Discount Mart, a chain of low-price stores, has asked Fairmount to supply it with 30,000 backpacks for a special promotion Riverside is planning. Riverside has offered to pay Fairmount a unit price of $49 per pack. The regular selling price is $71. The special order would require some modification to the basic model. These modifications would add $5.10 per unit in material cost. $2.60 per unit in labor cost, and $1.60 in variable overhead cost. Although Fairmount has the capacity to produce the 30,000 units without affecting its regular production of 461,000 units, a one-time rental of special testing equipment to meet Riverside's requirements would be needed. The equipment rental would be $49,000 and would allow Fairmount to test up to 61,000 units. Required: a. Prepare a schedule to show the impact of filling the Riverside order on Fairmont's profits for the year. b. Do you agree with the decision to accept the special order? c. Considering only profit, determine the minimum quantity of backpacks in the special order that would make it profitable. Complete this question by entering your answers in the tabs below. Required A Required B Required C Prepare a schedule to show the impact of filling the Riverside order on Fairmont's profits for the year. (Enter your answers in thousands rounded to 1 decimal place. (l.e., 5,400,400 should be entered as 5,400.4). Select option "higher" or "lower", keeping Status Quo as the base. Select "none" If there is no effect.) Sales revenue Less variable costs: Materials Labor Variable overhead Total variable cost Contribution margin Less Fixed costs Operating profit (loss) (All Costs in Thousands of Dollars) Status Quo Alternative 461,000 Units 491,000 Units 8.805.1 6,039.1 2812.1 $ 17,656.3 $ 0.0 Difference 3,273.1 3,322 1 49.0 higher Fairmount Travel Gear produces backpacks and sells them to vendors who sell them under their own label. The cost of one of its backpacks follows. Materials Labor $19.10 13.10 Variable overhead 6.10 Fixed overhead ($3,273,100 per year; 461,000 units per year) 7.10 Total $45.40 Riverside Discount Mart, a chain of low-price stores, has asked Fairmount to supply it with 30,000 backpacks for a special promotion Riverside is planning. Riverside has offered to pay Fairmount a unit price of $49 per pack. The regular selling price is $71. The special order would require some modification to the basic model. These modifications would add $5.10 per unit in material cost. $2.60 per unit in labor cost, and $1.60 in variable overhead cost. Although Fairmount has the capacity to produce the 30,000 units without affecting its regular production of 461,000 units, a one-time rental of special testing equipment to meet Riverside's requirements would be needed. The equipment rental would be $49,000 and would allow Fairmount to test up to 61,000 units. Required: a. Prepare a schedule to show the impact of filling the Riverside order on Fairmont's profits for the year. b. Do you agree with the decision to accept the special order? c. Considering only profit, determine the minimum quantity of backpacks in the special order that would make it profitable. Complete this question by entering your answers in the tabs below. Required A Required B Required C Prepare a schedule to show the impact of filling the Riverside order on Fairmont's profits for the year. (Enter your answers in thousands rounded to 1 decimal place. (l.e., 5,400,400 should be entered as 5,400.4). Select option "higher" or "lower", keeping Status Quo as the base. Select "none" If there is no effect.) Sales revenue Less variable costs: Materials Labor Variable overhead Total variable cost Contribution margin Less Fixed costs Operating profit (loss) (All Costs in Thousands of Dollars) Status Quo Alternative 461,000 Units 491,000 Units 8.805.1 6,039.1 2812.1 $ 17,656.3 $ 0.0 Difference 3,273.1 3,322 1 49.0 higher
Expert Answer:
Related Book For
Fundamentals of Cost Accounting
ISBN: 978-1259565403
5th edition
Authors: William Lanen, Shannon Anderson, Michael Maher
Posted Date:
Students also viewed these accounting questions
-
Fairmount Travel Gear produces backpacks and sells them to vendors who sell them under their own label. The cost of one of its backpacks follows: Materials . . . . . . . . . . . . . . . . . . . . . ....
-
Fairmount Travel Gear produces backpacks and sells them to vendors who sell them under their own label. The cost of one of his backpacks is as follows: Materials ps 18.70 Manpower of labour 12.70...
-
Garcia Corporation has paid 60 consecutive quarterly cash dividends (15 years). The last 6 months, however, have been a cash drain on the company, as profit margins have been greatly narrowed by...
-
On January 1, 2014, Pearce Company purchased an 80% interest in the capital stock of Searl Company for $2,460,000. At that time, Searl Company had capital stock of $1,500,000 and retained earnings of...
-
Without solving, determine the character of the solutions of each equation in the complex number system. 4x 2 + 12x + 9 = 0
-
The codon change (Gly-12 to Val-12) in human H-ras that converts it to oncogenic H-ras has been associated with many types of cancers. For this reason, researchers would like to develop drugs to...
-
McGill and Smyth have capital balances on January 1 of $50,000 and $40,000, respectively. The partnership income-sharing agreement provides for (1) annual salaries of $22,000 for McGill and $13,000...
-
1. Solve the double inequality below. Then graph the solution set on the real number line. -81+3(x-2) < 13
-
That section discusses a newer concept called "pay based on cost of living". The concept is to set one's pay by utilizing the cost of living for the company's headquarters and then adjusting to where...
-
For best collection results, collection agencies like to get the account at a maximum of: a. 1 or 2 months after the debt has occurred. b. 2 or 3 months after the debt has occurred. c. 3 or 4 months...
-
Choose a technology project that fits within these constraints based on your personal/professional experience or the topic you are interested in and provide examples and scenarios: 1. Budget of $2...
-
Select an e-commerce company. Visit its website or mobile app and describe its business model based on the information you find there. Identify its customer value proposition, its revenue model, the...
-
3. The biggest risk a bondholder faces is default risk, which is what?
-
1. The total cost to produce x handcrafted wagons is C(x) = -x+10x. Find the Marginal Cost Function C'(x). Marginal Cost Function = C(x)=. 2. If the price of each wagon is $4, find the Revenue...
-
Kaitlin Carlton, a CPA sole practitioner, prepares tax returns each year for approximately 100 clients. Items 1 through 8 each represent an independent factual situation in which Kaitlin has prepared...
-
Define cultural intelligence. Cite the books or journal articles you found in Capella's library. Explain why cultural intelligence is important for HR practitioners and other organizational managers.
-
Gage Corporation has two operating divisions in a semiautonomous organizational structure. Adams Division, located in the United States, produces a specialized electrical component that is an input...
-
Williams Corporation reports the following direct labor information for November: Standard rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $31.50 per hour Actual rate paid . . . . . ....
-
A business school dean asks you for help in understanding the school's inability to meet its budget. What are some of the variances you think might be important to consider? Why?
-
Which of the following is a discrete probability distribution? Approach In a discrete probability distribution, the sum of the probabilities must equal 1, and all probabilities must be between 0 and...
-
Graph the discrete probability distribution given in Table 1 from Example 2. Approach In the graph of a discrete probability distribution, the horizontal axis represents the values of the discrete...
-
Compute the mean of the discrete random variable given in Table 1 from Example 2. Approach Find the mean of a discrete random variable by multiplying each value of the random variable by its...
Study smarter with the SolutionInn App