07 Mar Mervin Company produces circuit boards that sell f
Mervin Company produces circuit boards that sell for $8 per unit. It currently has capacity to produce 600,000 circuit boards per year, but is selling 550,000 boards per year. Annual costs for the 550,000 circuit boards follow.Direct materials . . . . . . . . . . . . . . $ 825,000Direct labor . . . . . . . . . . . . . . . . . 1,100,000Overhead . . . . . . . . . . . . . . . . . . . 1,375,000Selling expenses . . . . . . . . . . . . . . . 275,000Administrative expenses . . . . . . . . . 550,000Total costs and expenses . . . . . . $4,125,000An overseas customer has offered to buy 50,000 circuit boards for $6 per unit. The customer is in a different market from its regular customers and would not affect regular sales. A study of its costs in anticipation of this additional business reveals the following:?c Direct materials and direct labor are 100% variable.?c Twenty percent of overhead is fixed at any production level from 550,000 units to 600,000 units; the remaining 80% of annual overhead costs are variable with respect to volume.?c Selling expenses are 40% variable with respect to number of units sold, and the other 60% of selling expenses are fixed.?c There will be an additional $0.20 per unit selling expense for this order.?c Administrative expenses would increase by a $700 fixed amount.Required1. Prepare a three-column comparative income statement that reports the following:a. Annual income without the special order.b. Annual income from the special order.c. Combined annual income from normal business and the new business.2. Should management accept the order? What nonfinancial factors should Mervin consider? Explain.Analysis Component3. Assume that the new customer wants to buy 100,000 units instead of 50,000 units it will only buy 100,000 units or none and will not take a partial order. Without any computations, how does this change your answer in part 2?
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.