Vernon Corporation makes and sells state-of-the art electronics products. One of its segments produces the math machine, an in expensive calculator. The company's chief accountant recently prepared the following income statement showing annual revenues and expnses associated with the segment's operating activities. The relevant range for the production and sale of the range for the production and sale of the calculators is between 33,000 and 71,000 units per year. Revenue (47,000 unitsx9.00) $423,000 Unit-level variable costs Materials cost (47,000x$2.00) ($94,000) labor cost (47,000x1.00) ($47,000) manufacturing overhead (47,000x $0.20) ($9,400) shipping and handling (47,000x $0.24) ($11,280) Sales commissions (47,000x$2.00) ($94,000) contribution margin $167,320 Fixed expenses Advertising costs ($30,000) Salary of production supervisor ($66,000) Allocated company-wide facility-level expenses ($82,000) Net loss ($10,680) Required A) A large discount store has approached the owner of vernon about buying 7,000 calcualtors. It would replace the Math Machine's label with its own logo to avoid affecting vernon's existing customers because the offer was made directly to the owner, no sales commssions on the transaction would be involved but discount store is willing to pay only $4.20 per calculator. Calculate the contribution margin from the special order. Based on quantitative factors alone should vernon accept the special order? B-1) Vernon has an opportunity to buy the 47,000 calcualtors it currently makes from a reliable competing manufacturer for $4.60 each. The products meets vernon's quality standards. vernon could continue to use its own logo, advertising program, and sales force to distribute the products. Calculate the total cost for Vernon to make and buy the 47,000 calcualtors. B-2) Should Vernon buy the calcualtors or continue to make them? B-3) Should Vernon buy the calculators or continue to make them, if the volume of sales were increased to 71,000 units? C) Because the calculator divison is currently operating at a loss should it be elimanted from the company's operation's specificqlly by what amount would the segment's elimantion increase or decrease profitablilty?
Vernon Corporation makes and sells state-of-the art electronics products. One of its segments produces the math machine, an in expensive calculator. The company's chief accountant recently prepared the following income statement showing annual revenues and expnses associated with the segment's operating activities. The relevant range for the production and sale of the range for the production and sale of the calculators is between 33,000 and 71,000 units per year.
Revenue (47,000 unitsx9.00) $423,000
Unit-level variable costs
Materials cost (47,000x$2.00) ($94,000)
labor cost (47,000x1.00) ($47,000)
manufacturing overhead (47,000x $0.20) ($9,400)
shipping and handling (47,000x $0.24) ($11,280)
Sales commissions (47,000x$2.00) ($94,000)
contribution margin $167,320
Fixed expenses
Advertising costs ($30,000)
Salary of production supervisor ($66,000)
Allocated company-wide facility-level expenses ($82,000)
Net loss ($10,680)
Required
A) A large discount store has approached the owner of vernon about buying 7,000 calcualtors. It would replace the Math Machine's label with its own logo to avoid affecting vernon's existing customers because the offer was made directly to the owner, no sales commssions on the transaction would be involved but discount store is willing to pay only $4.20 per calculator. Calculate the contribution margin from the special order. Based on quantitative factors alone should vernon accept the special order?
B-1) Vernon has an opportunity to buy the 47,000 calcualtors it currently makes from a reliable competing manufacturer for $4.60 each. The products meets vernon's quality standards. vernon could continue to use its own logo, advertising program, and sales force to distribute the products. Calculate the total cost for Vernon to make and buy the 47,000 calcualtors.
B-2) Should Vernon buy the calcualtors or continue to make them?
B-3) Should Vernon buy the calculators or continue to make them, if the volume of sales were increased to 71,000 units?
C) Because the calculator divison is currently operating at a loss should it be elimanted from the company's operation's specificqlly by what amount would the segment's elimantion increase or decrease profitablilty?
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