SafeRide, Inc. produces air bag systems that it sells to North American automobile manufacturers. Although the company has a capacity of 300,000 units per year, it is currently producing at an annual rate of 180,000 units. SafeRide, Inc. has received an order from a German manufacturer to purchase 60,000 units at $9.00 each. Budgeted costs for 180,000 and 240,000 units are as follows:
|
Don't use plagiarized sources. Get Your Custom Essay on saferide inc accept or reject the order 501062 For $10/Page 0nly | 180,000 Units | 240,000 Units |
| Manufacturing costs |
|
|
| Direct materials | $ 450,000 | $ 600,000 |
| Direct labor | 315,000 | 420,000 |
| Factory overhead | 1,215,000 | 1,260,000 |
| Total | 1,980,000 | 2,280,000 |
| Selling and administrative | 765,000 | 780,000 |
| Total | $ 2,745,000 | $ 3,060,000 |
|
|
| |
| Costs per unit |
|
|
| Manufacturing | $ 11.00 | $ 9.50 |
| Selling and administrative | 4.25 | 3.25 |
| Total | $ 15.25 | $ 12.75 |
Sales to North American manufacturers are priced at $20 per unit, but the sales manager believes the company should aggressively seek the German business even if it results in a loss of $3.75 per unit. She believes obtaining this order would open up several new markets for the company’s product. The general manager commented that the company cannot tighten its belt to absorb the $225,000 loss ($3.75 60,000) it would incur if the order is accepted.
(a) Calculate the net benefit (cost) of accepting the order from the German business.
(b) Calculate the net benefit (cost) of accepting the order from the German business, assuming the company is operating at full capacity.
Economic Debate- Progressive Income Tax For this Economic Debate, we are going to discuss the…
TOPIC: Going Global Discussion Thread 1 (initial post due Wednesday for full credit) Please note:…
Assignment Topic This week will culminate in the creation of a narrated PowerPoint to create…
The Assignment must be submitted on Blackboard (WORD format only) via allocated folder. Assignments submitted…
you need to post your 2-page information flier to share with your Final Project Group.…
discussion: Discuss the methods used at your company to measure and ensure quality products and…