Duarte Mfg. Corp. splits its manufacturing operations into profit centers by product line. One such pro...

 

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Duarte Mfg. Corp. splits its manufacturing operations into profit centers by product line. One such pro center manufactures a product, the P222, with production costs per unit based on a normal annual volume of 100,000 units are Direct materials Direct labor Variable overhead Fixed overhead $12 8 10 15 $45 The PZ22 is a tool used in plumbing and the manufacture of plastic products. It is sold to distributors at an average selling price of $100 per unit. The P222 incurs selling and administrative costs of $10 per unit plus $3,000,000 annually. The maximum capacity for P222 is 120,000 units annually to which all of the above cost rates are relevant. Duarte Mfg. Corp. has two offers for the PZ22 from companies that never purchased from Duarte in the past. 1) The first offer is from LeComte Company for 12,000 of standard Duarte units at $42 per unit. There is little likelihood that LeComte will purchase units in the future. 2) The second offer is from Martinez Corporation for 15,000 units at $35. Martinez is a potential new customer. To produce units for Martinez, Duarte would incur $30,000 of additional setup costs. Due to the special nature of the orders, Duarte Mfg. Company will only incur 50% of the relevant selling and administrative costs for both orders. The PZ22 product manager wants to reject both offers as the prices are below the production cost Supporting Calculations Required: Does Duarte Mfg. Corp. have sufficient excess capacity to consider both special orders? (2 points) Your Answer ACFI 430/530 Cost Accounting b. Page 14 of 21 Spring 2023 Identify the revenue and costs that are relevant to the special orders. Use the relevant data follopute the incremental profits (losses) resulting from the special orders. Complete the following tables to support your answers. (8 points) Revenue Costs: Total Incremental Profit (Loss) from the Special Orders Production Selling and Administrative Incremental Fixed Costs Total Relevant Costs Total Incremental Profit (Loss) Problem Set #1 Supporting Calculations Required: LeComte LeComte Company Order Martinez Corporation Order Martinez Duarte Mfg. Corp. splits its manufacturing operations into profit centers by product line. One such pro center manufactures a product, the P222, with production costs per unit based on a normal annual volume of 100,000 units are Direct materials Direct labor Variable overhead Fixed overhead $12 8 10 15 $45 The PZ22 is a tool used in plumbing and the manufacture of plastic products. It is sold to distributors at an average selling price of $100 per unit. The P222 incurs selling and administrative costs of $10 per unit plus $3,000,000 annually. The maximum capacity for P222 is 120,000 units annually to which all of the above cost rates are relevant. Duarte Mfg. Corp. has two offers for the PZ22 from companies that never purchased from Duarte in the past. 1) The first offer is from LeComte Company for 12,000 of standard Duarte units at $42 per unit. There is little likelihood that LeComte will purchase units in the future. 2) The second offer is from Martinez Corporation for 15,000 units at $35. Martinez is a potential new customer. To produce units for Martinez, Duarte would incur $30,000 of additional setup costs. Due to the special nature of the orders, Duarte Mfg. Company will only incur 50% of the relevant selling and administrative costs for both orders. The PZ22 product manager wants to reject both offers as the prices are below the production cost Supporting Calculations Required: Does Duarte Mfg. Corp. have sufficient excess capacity to consider both special orders? (2 points) Your Answer ACFI 430/530 Cost Accounting b. Page 14 of 21 Spring 2023 Identify the revenue and costs that are relevant to the special orders. Use the relevant data follopute the incremental profits (losses) resulting from the special orders. Complete the following tables to support your answers. (8 points) Revenue Costs: Total Incremental Profit (Loss) from the Special Orders Production Selling and Administrative Incremental Fixed Costs Total Relevant Costs Total Incremental Profit (Loss) Problem Set #1 Supporting Calculations Required: LeComte LeComte Company Order Martinez Corporation Order Martinez

Answer rating: 100% (QA)

To determine if Duarte Mfg Corp has sufficient excess capacity to consider both special orders we need to compare the maximum capacity of the P222 pro... View the full answer