Melbourne Company manufactures standard and customised products. Below is Melbourne Company’s annual income statement: Standard Product...

Melbourne Company manufactures standard and customised products. Below is Melbourne Company’s annual income statement:

		Standard Product	Customised Product	Total
Sales		$1,000,00	$2,000,000	$3,000,000
	Direct materials	$100,000	$200,000	$300,000
	Direct labour	$500,000	$800,000	$600,000
	Depreciation	$4,000	$6,000	$10,000
	Power (allocated)	$8,000	$4,000	$12,000
	Rent (allocated)	$20,000	$20,000	$40,000
	Heat and lighting (allocated)	$5,000	$5,000	$10,000
Total costs		$637,000	$1,125,000	$67,000
Profit		$363,000	$875,000	$1,238,000

A new customer has approached Melbourne Company requesting 10,000 units of the customised product and is offering to pay $20 per unit. Melbourne Company is currently operating at 100% of its full capacity, and if this special order is accepted it will need to reduce its current production of customised products by 10%. If the order is accepted, the associated direct material cost will be $2.50 per unit and direct labour cost will be $5 per unit. Melbourne Company will also need to spend an additional $1,000 for the purchase of a specialised equipment needed to produce this special order as the customer is requesting additional specifications to the customised product.

Required:

SHOW CALCULATION FOR EACH QUESTION IN THE RESPONSE BOX.

Based on your analysis of relevant financial information, determine the financial impact of this special order for Melbourne Company.
Based on your financial impact analysis, should Melbourne Company accept this special order? Why, why not? Please provide detailed explanations.
What two qualitative factors might impact Melbourne Company’s decision about this special-order request? Please explain each factor in detail.

Solutions

Expert Solution

ekkarill92 answered 2 years ago

Next > < Previous

Related Solutions

manufactures one product, cleverly named "Product A". The Income Statement below represents the operating results for...

manufactures one product, cleverly named "Product A". The Income Statement below represents the operating results for the fiscal year just ended, December 31, 2017, and reflects their use of VARIABLE COSTING for internal purposes. NEW JERSEY produced and sold 1,800 tons of Product A during the current year. The manufacturing capacity of NEW JERSEY's facilities is 3,000 tons of Product A. NEW JERSEY CORP. INCOME STATEMENT For the year ended December 31, 2017 Sales $ 900,000 Variable costs Manufacturing...

The Harding Company manufactures skates. The company’s income statement for 20X1 is as follows: HARDING COMPANY...

The Harding Company manufactures skates. The company’s income statement for 20X1 is as follows: HARDING COMPANY Income Statement For the Year Ended December 31, 20X1 Sales (11,100 skates @ $72 each) $ 799,200 Variable costs (11,100 skates at $31) 344,100 Fixed costs 260,000 Earnings before interest and taxes (EBIT) $ 195,100 Interest expense 65,500 Earnings before taxes (EBT) $ 129,600 Income tax expense (30%) 38,880 Earnings after taxes (EAT) $ 90,720 a. Compute the degree of operating leverage. (Round your...

Portions of the financial statements for Myriad Products are provided below. MYRIAD PRODUCTS COMPANY Income Statement...

Portions of the financial statements for Myriad Products are provided below. MYRIAD PRODUCTS COMPANY Income Statement For the Year Ended December 31, 2018 ($ in millions) Sales $ 840 Cost of goods sold 294 Gross margin 546 Salaries expense $ 135 Depreciation expense 92 Patent amortization expense 5 Interest expense 32 Loss on sale of land 4 268 Income before taxes 278 Income tax expense 139 Net Income $ 139 MYRIAD PRODUCTS COMPANY Selected Accounts from Comparative Balance Sheets December...

Portions of the financial statements for Myriad Products are provided below. MYRIAD PRODUCTS COMPANY Income Statement...

Portions of the financial statements for Myriad Products are provided below. MYRIAD PRODUCTS COMPANY Income Statement For the Year Ended December 31, 2016 ($ in millions) Sales $ 700 Cost of goods sold (245 ) Gross margin 455 Salaries expense $ 100 Depreciation expense 78 Patent amortization expense 5 Interest expense 18 Loss on sale of land 4 (205 ) Income before taxes 250 Income tax expense (125 ) Net Income $ 125 MYRIAD PRODUCTS COMPANY Selected Accounts from Comparative...

Portions of the financial statements for Myriad Products are provided below. MYRIAD PRODUCTS COMPANY Income Statement...

Portions of the financial statements for Myriad Products are provided below. MYRIAD PRODUCTS COMPANY Income Statement For the Year Ended December 31, 2018 ($ in millions) Sales $ 700 Cost of goods sold 245 Gross margin 455 Salaries expense $ 100 Depreciation expense 78 Patent amortization expense 5 Interest expense 18 Loss on sale of land 4 205 Income before taxes 250 Income tax expense 125 Net Income $ 125 MYRIAD PRODUCTS COMPANY Selected Accounts from Comparative Balance Sheets December...

Portions of the financial statements for Myriad Products are provided below. MYRIAD PRODUCTS COMPANY Income Statement...

Portions of the financial statements for Myriad Products are provided below. MYRIAD PRODUCTS COMPANY Income Statement For the Year Ended December 31, 2018 ($ in millions) Sales $ 720 Cost of goods sold 252 Gross margin 468 Salaries expense $ 105 Depreciation expense 80 Patent amortization expense 5 Interest expense 20 Loss on sale of land 4 214 Income before taxes 254 Income tax expense 127 Net Income $ 127 MYRIAD PRODUCTS COMPANY Selected Accounts from Comparative Balance Sheets December...

Portions of the financial statements for Myriad Products are provided below. MYRIAD PRODUCTS COMPANY Income Statement...

Portions of the financial statements for Myriad Products are provided below. MYRIAD PRODUCTS COMPANY Income Statement For the Year Ended December 31, 2018 ($ in millions) Sales $ 780 Cost of goods sold 273 Gross margin 507 Salaries expense $ 120 Depreciation expense 86 Patent amortization expense 5 Interest expense 26 Loss on sale of land 4 241 Income before taxes 266 Income tax expense 133 Net Income $ 133 MYRIAD PRODUCTS COMPANY Selected Accounts from Comparative Balance Sheets December...

Portions of the financial statements for Myriad Products are provided below. MYRIAD PRODUCTS COMPANY Income Statement...

Portions of the financial statements for Myriad Products are provided below. MYRIAD PRODUCTS COMPANY Income Statement For the Year Ended December 31, 2018 ($ in millions) Sales $ 860 Cost of goods sold 301 Gross margin 559 Salaries expense $ 140 Depreciation expense 94 Patent amortization expense 5 Interest expense 34 Loss on sale of land 4 277 Income before taxes 282 Income tax expense 141 Net Income $ 141 MYRIAD PRODUCTS COMPANY Selected Accounts from Comparative Balance Sheets December...

Q2. A company manufactures three products, X , Y and Z. The present net annual income...

Q2. A company manufactures three products, X , Y and Z. The present net annual income from these is: X Y Z TOTAL GH¢ GH¢ GH¢ GH¢ Sales 50,000 40,000 60,000 150,000 Variable costs 30,000 25,000 35,000 90,000 Contribution 20,000 15,000 25,000 60,000 Fixed costs 17,000 18,000 20,000 55,000 Profit / Loss 3,000 (3,000) 5,000 5,000 The company is concerned about its poor profit performance and it is considering whether or not to cease selling product Y. It is felt...

The following income statement is for X Company's two products, A and B: Product A Product...

The following income statement is for X Company's two products, A and B: Product A Product B Revenue $87,000 $95000 Total variable costs 49590 48,450 Total contribution margin $37,410 $46,550 Total fixed costs Avoidable 13,531 33,138 Unavoidable 11,999 22,092 Profit $11,880 $-8,680 If X Company drops Product B because it shows a loss and is able to use the vacant space to increase sales of Product A by $26,200, with $5,000 of additional fixed costs, what will be the effect...

Subjects