Epson produces color cartridges for inkjet printers. Suppose cartridges are sold to mail-order distributors for $5.20...

 

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Epson produces color cartridges for inkjet printers. Suppose cartridges are sold to mail-order distributors for $5.20 each. Total fixed costs per year are $820,800. Variable cost per unit are $1.85 for direct materials, $0.10 for direct labor, $0.30 for factory overhead, and $0.05 for distribution. The variable distribution costs are for transportation to mail-order distributors. Also assume the current annual production and sales volume is 432,000 and annual capacity is 528,000 units. REQUIRED Determine the effect of the following situation on annual profits. A Guatemalan manufacturer has offered a one-year contract to supply ink for the cartridges (including shipping costs) at a cost of $1.25 per unit. If Epson accepts the offer, it will be able to reduce variable manufacturing costs by 50% and rent some of its factory space to another company for $2,640 per month for 12 months. Note: enter all numbers as positive numbers, do NOT use a negative sign. Profits would decrease by $ 0 *If Epson accepted Guatemalan manufacturing offer. Should Epson accept Guatemalan manufacturing offering?: No Epson produces color cartridges for inkjet printers. Suppose cartridges are sold to mail-order distributors for $5.20 each. Total fixed costs per year are $820,800. Variable cost per unit are $1.85 for direct materials, $0.10 for direct labor, $0.30 for factory overhead, and $0.05 for distribution. The variable distribution costs are for transportation to mail-order distributors. Also assume the current annual production and sales volume is 432,000 and annual capacity is 528,000 units. REQUIRED Determine the effect of the following situation on annual profits. A Guatemalan manufacturer has offered a one-year contract to supply ink for the cartridges (including shipping costs) at a cost of $1.25 per unit. If Epson accepts the offer, it will be able to reduce variable manufacturing costs by 50% and rent some of its factory space to another company for $2,640 per month for 12 months. Note: enter all numbers as positive numbers, do NOT use a negative sign. Profits would decrease by $ 0 *If Epson accepted Guatemalan manufacturing offer. Should Epson accept Guatemalan manufacturing offering?: No

Answer rating: 100% (QA)

To determine the effect of the Guatemalan manufacturing offer on annual profits we need to calculate the changes in costs and revenues 1 Changes in Co... View the full answer