23-Homework Help Save & E Jones Products manufactures and sells to wholesalers a
ID: 2437754 • Letter: 2
Question
23-Homework Help Save & E Jones Products manufactures and sells to wholesalers approximately 200,000 packages per year of underwater markers at $3.94 per package. Annusl costs for the production and sale of this quantity are shown in the table. 64,000 Belling expenses 88,000 Total costs and expenses A new wholesaler has offered to buy 33,000 packages for $3.40 each. These markers would be marketed under the wholesalers not afflect Jones Products' sales through its normal channels. A study of the costs of this additional business reveals the folowing Drect materials costs are 100% variable. .Per unit direct labor costs for the addtional units would be 5o%, higher than normal because their production would require overtime pay at 1% times the usual labor rate of the normal annual overhead costs are fixed at any production l level from, 150,000 to 300,000 units. The remaining 70% of the annual overhead cost is variable Accepting the new . Accepting the new business business would involve no additional seling expenses would increase administrative expenses by a $5,000 fxed amount increase Required Complete the three-column unit cost answers to 3 decimals) 1. Annual operating income without the special order 2. Annual operating income received from the new business only 3. Combined annual comparative income statement that shows the following (Round your intermediate calculations and per operating income from normal business and the new business Now Business Normal New Business Combined MacBook Air FB 4) F1OExplanation / Answer
Ans:
Income Statement
Particulars
Per unit amounts
Total
Normal Volume
New Business
Normal Volume
New Business
Combined
Sales
3.94
3.4
788000
112200
900200
Variable Cost:
Direct Material
1.28
1.28
256000
42240
298240
Direct Labor
0.32
0.48
64000
15840
79840
Variable Overhead
0.672
0.81
134400
26730
161130
Total Variable Cost
2.272
2.57
454400
84810
539210
Contribution Margin
1.668
0.83
333600
27390
360990
Fixed Cost:
Fixed Overhead
0.288
0.00
57600
0.00
57600
Selling Expense
0.4
0.00
80000
0.00
80000
Administration Cost
0.265
0.15
53000
5000
58000
Total Fixed Cost
0.953
0.15
190600
5000
195600
Total Cost
3.225
0.98
645000
32390
677390
Income
0.715
0.68
143000
79810
222810
Important Note:
1.) Variable Expense Per Unit Calculation
Direct Material= 256000/200000= 1.28
Direct Labour= 64000/200000= 0.32
Variable Overhead= 192000-57600/200000= 0.672
2.) In the income Statement, All fixed cost are represented on per unit basis. But these cost does not change due to change in production volume unless any specific fixed cost is mentioned in the question. In the given question addtional administration fixed cost of 5000 is mentioned, which has been considered while calculating profit from new business.
Income Statement
Particulars
Per unit amounts
Total
Normal Volume
New Business
Normal Volume
New Business
Combined
Sales
3.94
3.4
788000
112200
900200
Variable Cost:
Direct Material
1.28
1.28
256000
42240
298240
Direct Labor
0.32
0.48
64000
15840
79840
Variable Overhead
0.672
0.81
134400
26730
161130
Total Variable Cost
2.272
2.57
454400
84810
539210
Contribution Margin
1.668
0.83
333600
27390
360990
Fixed Cost:
Fixed Overhead
0.288
0.00
57600
0.00
57600
Selling Expense
0.4
0.00
80000
0.00
80000
Administration Cost
0.265
0.15
53000
5000
58000
Total Fixed Cost
0.953
0.15
190600
5000
195600
Total Cost
3.225
0.98
645000
32390
677390
Income
0.715
0.68
143000
79810
222810
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