MZE Manufacturing Company has a normal plant capacity of 37,500 units per month.

Question

MZE Manufacturing Company has a normal plant capacity of 37,500 units per month. Because of an extra large quantity of inventory on hand, it expects to produce only 30,000 units in May. Monthly fixed costs and expenses are $112,500 (53 per unit at normal plant capacity) and variable costs and expenses are $8.25 per unit. The present selling price is $13.50 per unit. The company has an opportunity to sell 7,500 additional units at $9.90 per unit to an exporter who plans to market the product under its own brand name. The additional business is therefore not expected to affect the regular selling price or quantity of sales of MZE Manufacturing Company. s. Prepare a differential analysis to determine if MZE should accept the special order. What is the gair or loss if the special order is accepted? 4. Due to Medicare reimbursement cuts, Loving Home Care is considering shutting down its Certified Nursing Assistant (CNA) division. Fixed costs will have to be transferred to the Nursing Division if the CNA division is discontinued. Based on the following income statement, make a recommendation to the president regarding this decision. Loving Home Care Condensed Income Statement For the Year Ended December 31, 2013 Total Nursing C.N.A. $3,500,000 $1,000,000 $4,500,000 2,000,000 700,000 2,700,000 Revenues Variable Costs Fixed Costs Operating Income 00,000 400,000 800,000 1.100,000 ($100,000) $1,000,000 How much will operating income change if the CNA division is discontinued?

Explanation / Answer

3) Calculation of Net Operating Income :-

Particulars 30000 units 7500 unit 37500 units Sales (30000*$13.5) =$405000 (7500*$9.90) =$74250 ($405000+$74250) =$479250 Less : Variable Cost (30000*$8.25) =$247500 (7500*$8.25) =$61875 ($247500+$61875) =$309375 Contribution $157500 $12375 $169875 Less : Fixed Cost $112500 Net Operating Income $57375

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---

---

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