Question

Fanning Corporation makes and sets 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 69,000 units per year 57. Revenue (7,units $10. ) Unit-level wale costs Materials cost (37,000 $2.00) Labor cost ( 1 0 ) Manufacturing overhead (7. 10 Shipping and handling (17,00 Sales ons (57. 52.00) Contribution (70.00) (24 ) (11,100) (111) ) ) Advertising costs 65. ) Allocated company wide facility-level este los Required .. A large discount store has approached the owner of Fanning about buying 7000 calculators, it would replace The Moth Machine's Isbel with its own logo 10 vold aflecting Fannings existing customers. Because the offer was made directly to the owner, no sales Commons on the transaction would be involved, but the discount store is wing to pay only 5510 per calcio Calculate the contribution margin from the special order. Based on quantive factors alone, should Fanning accept the special order? -1. Fanning has an opportunity to buy the 37000 calculatorit cumenty makes toma t e compong manufacturer for $5.60 each The product meets Fangsualny standards, Fanning could continue to use its own logo, advertising program and sales force to distribute the products Calculate the total cost for Fanning to make and buy the 37000 calculators 2. Should Forng buy the calculators of continue to make them 3. Should Fanning buy the customs or continue to make them the volume of als were increased to 69,000 units c. Because the color vion is currently operating at a loss should it be liminated from the company's operations Support your answer with propriate computations specifically, by what amount would the segments on increase or decrease proy Red Algere has posted the b a ce The Man Machete g er. Berthollerade directly to the en co u ld be involved, but the discount starting to calculator Calculate the contribut or the special de Bases factors on the c h osendicated bygn)

Answer 1

A71 BICIDE 47 B.3) 48 Cost of Making Calculators 49 Particular Amount in s 50 Variable Cost 51 Material Cost (69000 X $ 2) 138000 52 Labour Cost (69000 X $ 2) 138000 53 Manufacturing Overhead (69000 X $ 0.3 20700 54 Shipping and Handling (69000 X $ 0.30) 20700 317400 56 Fixed Cost 57 Advertising Cost 25000 58 Salary of production supervisor 65000 59 Allocated Company wide facility exper 78000 168000 55 61 62 Total cost of manufacturing 485400 65 Cost of Buying Calculator 66 Particular Amount in s 67 Buying Price (69000 X $ 5.60) 386400 68 Advertisment Cost 25000 69 Allocatec Company wide facility expen 78000 70 Total cost of Buying 489400 The buying cost is more than $ 4000 from manufacturing cost at the level of 69000 units. So its better to manufacture the product in house Sheet1 Sheet2 Ready O Type here to search Z580

Z" E E Merge & Center % Format Painter lipboard : Conditional Formats Cell Formatting Table Styles - Styles Insert Delle Format - - - Cells Clear Sorta Filter - Sel Editing Font Alignment Number f A) в с р E F G H I J K Particular Revenue (7000 X $ 5.10) Amount in $ 35700 Less Material Cost (7000 X $ 2) Labour Cost (7000 X $ 2) Manufacturing Overhead (7000 X $ 0.30) Shipping and Handling (7000 X $ 0.30) - 14000 -14000 -2100 -2100 Contribution Margin 3500 Yes the Fanning Corporation should accept this order as the contribution margin received from sale of 7000 units is $3500. This will help the Fanning Corporation to reduce its loss arising due to fixed cost. Sheet Sheet2 - ENG O Type here to search lenovo Puso D F1051112 OME

Clipboard Font Alignment A93 BICIDE IF IGIH 75 C) The calculator division is currently at loss due to the high Fixed cost. The contribution margin is positive for the calculator segment at the level of 37000 units. The Fanning corporation should try to increase the sale of its calculator so that it meets its fixed cost. 16 The segment elimination will decrease the profit by $78000 as the allocated cost to this segment has to be appropriated between other segments without generating any additional profit. 78 79 30 27

B.2) Fanning Corporation should buy the Calculators as Fanning Corporation will save $ 28000 on purchase of 37000 calculators. The cost of manufacturing Calculators is $ 338200 however the Buying cost is just $310200 B.3) Cost of Making Calculators Particular Amount in $ Variable Cost Material Cost (69000 X $ 2) 138000 Labour Cost (69000 X $ 2) 138000 Manufacturing Overhead (69000 X $ 0.30) 20700 Shipping and Handling (69000 X $ 0.30) 20700 217A

16 Cost of Making Calculators 17 Particular Amount in s 18 Variable Cost 19 Material Cost (37000 XS2) 74000 20 Labour Cost (37000 XS 2) 74000 21 Manufacturing Overhead (37000 X $ 0.3 11100 22 Shipping and Handling (37000 X S 0.30) 11100 170200 24 Fixed Cost 25 Advertising Cost 25000 26 Salary of production supervisor 65000 27 Allocatec Company wide facility expen 78000 168000 23 28 30 Total cost of manufacturing 338200 31 32 33 Cost of Buying Calculator 34 Particular Amount in s 35 Buying Price (37000 X 5 5.60) 207200 36 Advertisment Cost 25000 37 Allocatec Company wide facility expen ! 78000 38 Total cost of Buying 310200 39 * Advertisment and allocated cost is the fixed cost which have to be incurred in both the cases, as it is irrelevant cost. Only relevant cost can be avoided by buying product from outside. Sheet1 Sheet2 Ready O Type here to search Z580
A)

Revenue($ 5.10* 7000).