Question

Vernon Corporation makes and sells state-of-the-art electronics products. One of its segments produces The Math Machine, an Inexpensive calculator. The company's chief accountant recently prepared the following Income statement showing annual revenues and expenses associated with the segment's operating activities. The relevant range for the production and sale of the calculators is between 33,000 and 71,000 units per year. $423,00 Revenue (47,eee units x $9) Unit-level variable costs Materials cost (47,080 x $2) Labor cost (47,080 x $1) Manufacturing overhead (47,898 x $0.20) Shipping and handling (47,898 x $8.24) Sales commissions (47,800 x $2) Contribution margin Fixed expenses Advertising costs Salary of production supervisor Allocated company wide facility-level expenses Net loss (94, 60e) (47,000) (9,400) (11,280) (94, eee) 167,320 (30,880) (66, 000) (82, 000) $(19,680) Required a. A large discount store has approached the owner of Vernon about buying 7,000 calculators. It would replace The Math Machine's Its own logo to avoid affecting Vernon's existing customers. Because the offer was made directly to the owner, no sales commissions on the transaction would be involved, but the discount store is willing to pay only $4.20 per calculator. Calculate the contribution margin from the special order. Based on quantitative factors alone, should Vernon accept the special order? b-1. Vernon has an opportunity to buy the 47,000 calculators It currently makes from a reliable competing manufacturer for $4.60 each. The product meets Vernon's quality standards. Vernon could continue to use its own logo, advertising program, and sales force to distribute the products. Should Vernon buy the calculators or continue to make them? b-2. Calculate the total cost for Vernon to make and buy the 47,000 calculators b-3. Should Vernon buy the calculators or continue to make them, if the volume of sales were increased to 71,000 units? c. Because the calculator division is currently operating at a loss, should it be eliminated from the company's operations? Support your answer with appropriate computations. Specifically, by what amount would the segment's elimination Increase or decrease profitability? Complete this question by entering your answers in the tabs below. Required A Required B1 Required B2 Required B3 Required c A large discount store has approached the owner of Vernon about buying 7,000 calculators. It would replace The Math Machine's label with its own logo to avoid affecting Vernon's existing customers. Because the offer was made directly to the owner, no sales commissions on the transaction would be involved, but the discount store is willing to pay only $4.20 per calculator. Calculate the contribution margin from the special order. Based on quantitative factors alone, should Vernon accept the special order? (Negative amounts should be indicated by a minus sign.) Show less Contribution margin (loss) Should Vernon accept the special order? < Required A Required B1 >

NEED HELP WITH ALL PARTS PLS

Answer 1

ANSWER:

a.

Contribution margin (loss) $	5320
Should Vernon accept the special order?	Yes

Sales price $	4.20
Less: Variable costs
Materials cost	2.00
Labor cost	1.00
Manufacturing overhead	0.20
Shipping and handling	0.24
Total variable costs	3.44
Contribution margin per unit $	0.76
Number of units in special order	7000
Contribution margin $	5320

b1.

Should Vernon buy the calculators or continue to make?

Buy

b2.

	Make	Buy
Total relevant cost $	216400	216200

	Make	Buy
Materials cost	94000	0
Labor cost	47000	0
Manufacturing overhead	9400	0
Salary of production supervisor	66000	0
Purchase cost (47000 x $4.60)	0	216200
Total relevant cost	216400	216200

b3.

Should Vernon buy the calculators or continue to make?

Make

	Make	Buy
Materials cost	142000	0
Labor cost	71000	0
Manufacturing overhead	14200	0
Salary of production supervisor	66000	0
Purchase cost (71000 x $4.60)	0	326600
Total relevant cost	293200	326600

c.

Contribution to profit (loss) $	71320
Should it be eliminated from the company's operations?	No

Contribution margin	167320
Less: Traceable fixed expenses ($30000 + $66000)	96000
Segment margin	71320

Elimination of the calculator division would decrease profitability to the extent of the segment margin which is $71320.

_____________________________________________

If you have any query or any Explanation please ask me in the comment box, i am here to helps you.please give me positive rating.

*****************THANK YOU**************