Question
In: Accounting
Ironwood Company manufactures a variety of sunglasses. Production information for its most popular line, the Clear...
Ironwood Company manufactures a variety of sunglasses.
Production information for its most popular line, the Clear Vista
(CV), follows:
| Per Unit | |||||
| Sales price | $ | 52.50 | |||
| Direct materials | 21.00 | ||||
| Direct labor | 10.00 | ||||
| Variable manufacturing overhead | 2.00 | ||||
| Fixed manufacturing overhead | 5.00 | ||||
| Total manufacturing cost | $ | 38.00 | |||
Suppose that Ironwood has been approached about producing a special
order for 2,900 units of custom CV sunglasses for a new
semiprofessional volleyball league. All units in the special order
would be produced in the league’s signature colors with a specially
designed logo emblem attached to the side of the glasses. The
league has offered to pay $50.00 per unit in the special order.
Additional costs for the special order total $4.00 per unit for
mixing the special frame color and purchasing the emblem with the
league’s logo that will be attached to the glasses.
Required:
1. Assume Ironwood has the idle capacity necessary to
accommodate the special order. Calculate the additional
contribution margin Ironwood would make by accepting the special
order.
|
2-a. Calculate the current contribution margin per unit.
|
2-b. Suppose Ironwood is currently operating its production facility at full capacity and accepting the special order would mean reducing production of its regular CV model. Should Ironwood accept the special order in this case?
|
3. Calculate the special order price per unit at which Ironwood is indifferent between accepting or rejecting the special order.
|
Solutions
Expert Solution
Answer to Question to Question 1 and 2-a:
Answer to Question 2-b and 3:
ekkarill92 answered 1 year agoRelated Solutions
Ironwood Company manufactures a variety of sunglasses. Production information for its most popular line, the Clear...
Ironwood Company manufactures a variety of sunglasses.
Production information for its most popular line, the Clear Vista
(CV), follows:
Per Unit
Sales price
$
48.50
Direct materials
17.00
Direct labor
10.00
Variable manufacturing overhead
3.00
Fixed manufacturing overhead
5.00
Total manufacturing cost
$
35.00
Suppose that Ironwood has been approached about producing a special
order for 2,500 units of custom CV sunglasses for a new
semiprofessional volleyball league. All units in the special order
would be produced in the league’s...
Ironwood Company manufactures a variety of sunglasses. Production information for its most popular line, the Clear...
Ironwood Company manufactures a variety of sunglasses.
Production information for its most popular line, the Clear Vista
(CV), follows:
Per Unit
Sales price
$
50.50
Direct materials
19.00
Direct labor
10.00
Variable manufacturing overhead
5.00
Fixed manufacturing overhead
5.00
Total manufacturing cost
$
39.00
Suppose that Ironwood has been approached about producing a special
order for 2,700 units of custom CV sunglasses for a new
semiprofessional volleyball league. All units in the special order
would be produced in the league’s...
Ironwood Company manufactures a variety of sunglasses. Production information for its most popular line, the Clear...
Ironwood Company manufactures a variety of sunglasses.
Production information for its most popular line, the Clear Vista
(CV), follows:
Per Unit
Sales price
44.50
Direct materials
13.00
Direct labor
10.00
Variable manufacturing overhead
4.00
Fixed manufacturing overhead
5.00
Total manufacturing cost
32.00
Suppose that Ironwood has been approached about producing a special
order for 2,100 units of custom CV sunglasses for a new
semiprofessional volleyball league. All units in the special order
would be produced in the league’s signature colors...
Ironwood Company manufactures a variety of sunglasses. Production information for its most popular line, the Clear...
Ironwood Company
manufactures a variety of sunglasses. Production information for
its most popular line, the Clear Vista (CV),
follows:
Per Unit
Sales price
$
51.50
Direct
materials
20.00
Direct
labor
10.00
Variable
manufacturing overhead
6.00
Fixed
manufacturing overhead
5.00
Total
manufacturing cost
$
41.00
Suppose that Ironwood has been approached about producing a special
order for 2,800 units of custom CV sunglasses for a new
semiprofessional volleyball league. All units in the special order
would be produced in the league’s...
Standard Costing: Ultra, Inc. manufactures and sells a full line of sunglasses. The company uses a...
Standard Costing:
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held responsible for the explanation of the variances in their
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Static Budget
Actual
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DM
$150,000
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DL
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Problem #2: Standard Costing Ultra, Inc. manufactures and sells a full line of sunglasses. The company...
Problem #2:
Standard Costing
Ultra, Inc. manufactures and sells a full line of
sunglasses. The company uses a standard cost system.
Department
managers' are held responsible for the explanation
of the variances in their department performance
reports.
Recently, the variances in the Prestige line of
sunglasses have been of concern. Data for the month of August
is
presented below. Assume beginning and ending
inventory levels for WiP and FG are zero.
Static Budget
Actual
revenues
$600,000
$625,000
DM
$150,000
$163,400...
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