Genia Enterprises, Inc. has the capacity to produce 12,000 units per year. Expec
ID: 2426163 • Letter: G
Question
Genia Enterprises, Inc. has the capacity to produce 12,000 units per year. Expected operations for the year are
Sales (10,000 units @ $20)
$200,000
Manufacturing expenses:
Variable
$8 per unit
Fixed
$40,000
Marketing expenses:
Variable
$3 per unit
Fixed
$20,000
REQUIRED:
a.
What is the expected level of operating profits?
b.
Should the company accept a special order for 1,000 units at a selling price of $15 if variable marketing expenses associated with this special order would be $2 per unit? Calculate the incremental profits if the order is accepted.
c.
Suppose the company received a special order for 3,000 units at a selling price of $15 with no variable marketing expenses. Calculate the impact on operating profits.Note that the expected level of operations for the company is 10,000 units, maximum capacity of production for the company is 12,000 units.
Sales (10,000 units @ $20)
$200,000
Manufacturing expenses:
Variable
$8 per unit
Fixed
$40,000
Marketing expenses:
Variable
$3 per unit
Fixed
$20,000
Explanation / Answer
a)
expected level of operating profits
Amount in $
perating profit 30,000
b) Incremental contribution per unit=$15-$11-$2=$2
Incremental contribution because of order=$1000*$2==2,000
so opearating profit increased=30,000+2,000=32,000
c)
Incremental contribution per unit=$15-$11-$=$4
Incremental contribution because of order=$3000*$4-$5,000*==7,000
loss for 1,000 units above production =$20-$15=$5
*total loss=$5*1,000=$5,000
so opearating profit increased=30,000+7,000=37,000
pariculars per unit amount Sales (10,000 units) 20 200,000 Less: variable cost manufactruing 8 80,000 marketing 3 30,000 contribution 9 90,000 Less;Manufacturing fixed cost 40,000 marketing fixed cost 20,000Related Questions
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