Macon Corporation manufactures and sells a standard smartphone for $75 per unit.

Question

Macon Corporation manufactures and sells a standard smartphone for $75 per unit. The company's costs for 2016 are expected to be as follows (based upon 10,000 standard smartphones produced and sold): Macon Corporation's maximum annual capacity is 15,000 machine hours. It takes 1.25 machine hours to manufacture each standard smartphone. Treat each situation independently unless instructed to do otherwise. During 2016, Beach Company approaches Macon with an offer to purchase 1,000 standard smartphones at a price of $60 per unit. Since no sales commissions will be paid on this order, the variable selling and administrative cost will be 40% less than on regular sales.

Explanation / Answer

Answer A: 1:

As per above table it is clear that order should not be accepted.

2: a.) Macon's Capacity is to produce 12,000 smartphones in case macon's accept the order they have to outsource 600 units for production.

b.) The Quality need to be compromised while accepting this order as the machine hous are limited.

Answer B: 1: Macon can produce waterproof smartphones:

Total hous required for droped level of normal phones: (10,000 * 90%) * 1.25 = 11,250

Hours left after addition of capacity = 20,000 - 11250 = 8,750

Waterproof smartphone can be produces = 8750 / 2 = 4,375

2:

New Waterproof smartphones should be produced.

3: a.) Macon's Capacity is to produce new unit f it provide value add on to company.
b.) The Quality need to be same or at upper level from last product.

Particular Beach's order Accepted Beach's Order Rejected Unit Cost Amount Unit Cost Amount Selling Price For 1,000 accepted production 60 60,000 0 0 For 11,000 normal production 75 825,000 0 0 For 11,600 0 0 75 870,000 Total Sales 885,000 870,000 Direct Material 20 240,000 20 232,000 Direct Labour 14 168,000 14 162,400 Variable Overhead 11 132,000 11 127,600 Varible Selling and Administrative 11,000 units 5 55,000 0 0 Varible Selling and Administrative 1,000 units 3 3,000 0 0 Varible Selling and Administrative 11,600 units 0 0 5 58,000 Fixed Overhead (based on 10,000 units) 8.5 85,000 8.5 85,000 Fixed Selling and Administrative (based on 10,000 units) 4.2 42,000 4.2 42,000 Total Cost 725,000 707,000 Profit 160,000 163,000

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.