The Cloud Burst Sprinkler Company of Benicia, California has been manufacturing and selling a water efficient...

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The Cloud Burst Sprinkler Company of Benicia, California has been manufacturing and selling a water efficient sprinkler exclusively to Home Depot for the last two years. Although there is not a binding contract that gives Home Depot exclusive rights to buy and stock the sprinkler in their network of locations, Cloud Burst has placed a great deal of importance on keeping Home Depot locations across the country and throughout Canada fully stocked with their water efficient sprinkler. ACE Hardware has approached Cloudburst indicating they would like to stock the water efficient sprinkler in their 4,192 stores across the United States. The initial proposal submitted by ACE is to purchase 50,304 sprinklers which will result in a dozen sprinklers stocked in every store. The proposal received from ACE will not affect fixed costs, however, ACE has requested a special onetime quantity wholesale discount price of $5.25 per sprinkler For the first 6 months of 2021, Cloud Burst Sprinkler Company achieved the following operating results while operating at 67% capacity and selling 100,000 sprinklers exclusively to Home Depot: $580,000 319,000 261,000 95,000 $ 166,000 Sales to Home Depot Cost of goods sold Gross profit Operating expenses Net income Cost of goods sold is 100% variable; operating expenses are 10% variable and 90% fixed. Instructions: (a) Prepare an incremental analysis for the ACE Hardware proposal. (b) Should Cloud Burst Sprinkler Company accept the ACE Hardware proposal? (c) What "Qualitative" Factors should the Cloud Burst Sprinkler Company be thinking about and considering? The Cloud Burst Sprinkler Company of Benicia, California has been manufacturing and selling a water efficient sprinkler exclusively to Home Depot for the last two years. Although there is not a binding contract that gives Home Depot exclusive rights to buy and stock the sprinkler in their network of locations, Cloud Burst has placed a great deal of importance on keeping Home Depot locations across the country and throughout Canada fully stocked with their water efficient sprinkler. ACE Hardware has approached Cloudburst indicating they would like to stock the water efficient sprinkler in their 4,192 stores across the United States. The initial proposal submitted by ACE is to purchase 50,304 sprinklers which will result in a dozen sprinklers stocked in every store. The proposal received from ACE will not affect fixed costs, however, ACE has requested a special onetime quantity wholesale discount price of $5.25 per sprinkler For the first 6 months of 2021, Cloud Burst Sprinkler Company achieved the following operating results while operating at 67% capacity and selling 100,000 sprinklers exclusively to Home Depot: $580,000 319,000 261,000 95,000 $ 166,000 Sales to Home Depot Cost of goods sold Gross profit Operating expenses Net income Cost of goods sold is 100% variable; operating expenses are 10% variable and 90% fixed. Instructions: (a) Prepare an incremental analysis for the ACE Hardware proposal. (b) Should Cloud Burst Sprinkler Company accept the ACE Hardware proposal? (c) What "Qualitative" Factors should the Cloud Burst Sprinkler Company be thinking about and considering?

Answer rating: 100% (QA)

a Revenue 50304 units x 525 264096 Available capacity 100000 067 033 49254 units Loss of regular sal... View the full answer