4 Jones Products manufactures and sells to wholesalers approximately 300,000 pac

Question

4 Jones Products manufactures and sells to wholesalers approximately 300,000 packages per year of underwater markers at $3.99 per package. Annual costs for the production and sale of this quantity are shown in the table 20 points Direct materials Direct labor Overhead Selling expenses Administrative expenses Total costs and expenses $384,000 96,000 288,000 120,000 80,000 eBook $968,000 Print A new wholesaler has offered to buy 50,000 packages for $3.33 each. These markers would be marketed under the wholesaler's name and would not affect Jones Products' sales through its normal channels. A study of the costs of this additional business reveals the following: References Direct materials costs are 100% variable Per unit direct labor costs for the additional units would be 50% higher than normal because their production would require overtime pay at 1% times the usual labor rate 30% of the normal annual overhead costs are fixed at any production level from 250,000 to 400,000 units. The remaining 70% of the annual overhead cost is variable with volume. Accepting the new business would involve no additional selling expenses. Accepting the new business would increase administrative expenses by a $4,000 fixed amount. * * · Required Complete the three-column comparative income statement that shows the following (Round your intermediate calculations and per unit cost answers to 3 decimals) . Annual operating income without the special order. 2. Annual operating income received from the new business only 3. Combined annual operating income from normal business and the new business. Per Unit Amounts Normal Volume Business Volume Business ota New New Normal Combined Sales Variable costs Fixed costs

Explanation / Answer

PREPARE THREE COLUMN COMPARATIVE INCOME STATEMENT : PER UNIT TOTAL PARTICULAR NORMAL VOLUME NEW BUSSINESS NORMAL VOLUME NEW BUSSINESS COMBINED SALES 3.99 3.33 1197000 166500 1363500 VARIABLE COST : DIRECT MATERIAL 1.28 1.28 384000 64000 448000 DIRECT LABOUR 0.32 0.48 96000 24000 120000 VARIABLE OVERHEAD 0.672 0.672 201600 33600 235200 TOTAL VARIABLE COST 2.272 2.432 681600 121600 803200 CONTRIBUTION MARGIN 1.718 0.898 515400 44900 560300 FIXED COST: SELLING EXP. 120000 120000 ADMINISTRATION EXP. 80000 4000 84000 OTHER FIXED OVERHEAD 86400 86400 PROFIT 229000 40900 269900 DIRECT MATERIAL = 384000/300000 =1.28 DIRECT LABOUR= 96000/300000=0.32*1.5 =0.48 OVERHEAD = 288000= 201600 VARIABLE AND 86400 FIXED

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