HYPOTHETICAL SITUATION: Midwest Windows can produce 10,000 windows per year. Its normal year of operations involves...
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HYPOTHETICAL SITUATION: Midwest Windows can produce 10,000 windows per year. Its normal year of operations involves the following: Sales (8,000 units @ $220) Manufacturing cost $1,760,000 Variable per unit Fixed 150 260,000 Selling and administrative cost Variable (commission) per unit on sales Fixed 12 60,000 4165 During the year, Midwest is approached by a contractor to buy 1,500 windows for $166 each. The variable sales commission is set to be a flat fee of $15,000 for the special order. The fixed costs $60,000 are not affected by the decision. You are a cost analyst in Midwest Windows. The manager would like to evaluation this decision based on your recommendations. Provide your thorough analysis for each of the following scenarios. 1. Should Midwest Windows accept or reject the special order for 1,500 windows at $165 each? Provide your analysis to support your decision. 2. Assume, instead, that the contractor needs a total of 2,500 windows; all other information remains the same. a) What is the opportunity cost if Midwest accept the special order? Provide your calculations. b) Should Midwest accept or reject the special order for 2,500 windows at $165? Provide your analysis to support your decision. c) What price would Midwest consider the special order for 2,500 windows? (Hint: Calculate the break-even point in the analysis for accept vs. reject). HYPOTHETICAL SITUATION: Midwest Windows can produce 10,000 windows per year. Its normal year of operations involves the following: Sales (8,000 units @ $220) Manufacturing cost $1,760,000 Variable per unit Fixed 150 260,000 Selling and administrative cost Variable (commission) per unit on sales Fixed 12 60,000 4165 During the year, Midwest is approached by a contractor to buy 1,500 windows for $166 each. The variable sales commission is set to be a flat fee of $15,000 for the special order. The fixed costs $60,000 are not affected by the decision. You are a cost analyst in Midwest Windows. The manager would like to evaluation this decision based on your recommendations. Provide your thorough analysis for each of the following scenarios. 1. Should Midwest Windows accept or reject the special order for 1,500 windows at $165 each? Provide your analysis to support your decision. 2. Assume, instead, that the contractor needs a total of 2,500 windows; all other information remains the same. a) What is the opportunity cost if Midwest accept the special order? Provide your calculations. b) Should Midwest accept or reject the special order for 2,500 windows at $165? Provide your analysis to support your decision. c) What price would Midwest consider the special order for 2,500 windows? (Hint: Calculate the break-even point in the analysis for accept vs. reject).
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Cost Management Measuring Monitoring And Motivating Performance
ISBN: 9781118168875
2nd Canadian Edition
Authors: Leslie G. Eldenburg, Susan Wolcott, Liang Hsuan Chen, Gail Cook
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