Question

Jordan 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 37,000 and 71,000 units per year. $ 418,000 Revenue (38,000 units * $11.00) Unit-level variable costs Materials cost (38,000 * $3.00) Labor cost (38,000 * $2.00) Manufacturing overhead (38,000 * $0.10) Shipping and handling (38,000 * $0.25) Sales commissions (38,000 * $2.00) Contribution margin Fixed expenses Advertising costs Salary of production supervisor Allocated company-wide facility-level expenses Net loss (114,000) (76,000) (3,800) (9,500) (76,000) 138,700 (27,000) (67,000) (82,000) $ (37,300) Required a. A large discount store has approached the owner of Jordan about buying 7,000 calculators. It would replace The Math Machine's label with its own logo to avoid affecting Jordan's existing customers. Because the offer was made directly to the owner, no sales commissions on the transaction would ut the discount store is willing to pay only $5.60 per Calculate the contribution margin from the special order. Based on quantitative factors alone, should Jordan accept the special order?

Answer 1

jordhan corporation makes and sell state of the art electronics products.

sells state-of-the-art eledramics Jordan Corporation makes and Products. a) A large discount store has approached the owner of Jordan about bying 7000 calcaltors. contribution margin (loss) $ 1750 Should Sordan accept the special order? Yes working 5:35 Sales Price per unit unit level variable cost per unit C$3 +$2 + $0.10 a $0.25) contribution margin per unit & - number of walts of special order I total contribution margin & 0.25 7000 1750 B-1 Jordhan has an opportunity to buy the 38,000 calculators. currently reliable Compenting manufactor for $6.30 each. 0 2394.00 Make Buy Purchasing cost (38000 X $6.30) unit levd variable costs Materials cost 114000 o Labos COSE 76000 Manufacturing overhead 3800 Fixed expenses: Salary of production supervier 67000 a Total relevant cost $ 260 800 239400

the shipping and handling sales commissions advertir -sing costs, and allocated company-wide facility level expenses are irrelevant since they coould be incurred irrespective of whether Jordan makes or buys the cat Calators and hence are excluded from the total rele- vant cost 3.2 should Jorahan boly the calculators or continue to make them? should Jordhan buy the calculators to or continue make ? BAY 6-3 should sordhan buy the calculators or continue to make them , if the volume of sales coere increased to 71000 unity? should Jordhan buy the calculators or continue to make? continue to mak Make Boy 247.300:00 cast Total relevant Calcalations Total relevant cost Make -17.000 (3+2+0.14005) Byy +(71000 * (63))

C Because the calculator division is a loss, should it be eliminated from currently operating at the company's operator? $ 44,700 Contribution to Profet (loss) should it be eliminated from the company operations? ! no working Contribution margin of calcultor division 139700 less Traceable fixed expenses ($27000+$67000) 94000 I contribution to profit Closs) 14700