Question

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UR KNOWLEDGE 1. Business Decision Case The following total cost data are for Ralston Manufacturing Company, which has a normal capacity per period of 400,000 units of product that sell for $18 each. For the foreseeable future, regular sales volume should continue at normal capacity of production. 4:43 PN 9/13/20

Answer 1

They should receive the $11 per unit of lowest uni't sales Price PER UNIT and she'll makes a before Tax Profit of $39600 on the special Ordey. $501600 To tal cost (excluding Commission ) Plus desired net in come before income taxes Add: commission 1 $ 50/600 $26400 95% x 51.) Total sales value $528000 Number of Units 48000 lowest Unit Sales Price per Unit they 000 showeld meceive ($ 528000/48000) $1

one or more units. sale quote: selling expenses que 100%. of sales Commission. Ralson Pays only half of the sales commission rates on any sale of 20000 units Hence, lation will pay commissim Of 5' 63 (x 10 y.) OF 48000 unit. Henlla Sale before commission Commission = 5l of sale. Sale after commission $ Sol 600 $ 528000 9 sati $ 501600

1.9) Analysis supporting in decision to accept or veje is the special orden. Increased loomule attributable to the Special $768000 Order ( 48000 x *16) +25+1. (Ooooh 400 000 ) +25:1.1 4.560000 3) $1.75 Чоо бес, Se Costs : Increased Cost :( Pome Unth Vouinble wst) Direct Materials ( $ 179,800/400 000) -41319 $ 215 Drech labor le 11120000 H120000 :)) $ 3.5 Variable overhead (11 46.600D lling Commission ( $18 X 10 •• *1/2) $0.90 To teel Pen Unit variable cost! + Puery bite. Vo riable $8.65 (Overhead plus commission Wnits in special Orden 48000 unit To tu variable cost ( 48000 x $ 8.65) ($415200) Contributiem Haugin from Special Order : #359 800 Incremental fixed costs ( 3 x $ 30.000) 48000* X $ 30000 000) Increase in Net In come before Taxes $262800 ($ 90000) 20 000 Decision : A Special Ordey should be accepted as the special Order increases net income 48000 x $ 30000 2.4* x $ 30000 = 3 X $ 30 000 = $ 90000 20 000 * as 3" because of Note I in the problem as út stating # 2.4 is tallen fixed lost increases for 20000 units of fractiem proud thewe of

an nints!! by Meeting a target profit: Adjusted unit variable lost (48.65 - $0.9) ( Wireduced commission) $ 7.75 TO tal Adjusted variable lost 148000 x $ 7.75) $ 372000 $ 90000 $39600 TO tul In Crease in fixed costs Desired net Income before income taxes To tal cost (exclucling Commission) plus desired net income before income Taxes & Soltoo