Question

Karakomi Cameras Inc. has a Disposables Division that produces a camera that sells for $11.00 per unit in the open market. The cost of the product is $8.15 (variable manufacturing of $5.00, plus fixed manufacturing of $3.15). Total fixed manufacturing costs are $220,500 at the normal annual production volume of 70,000 units. The Overseas Division has offered to buy 20,000 units at the full cost of $8.15. The Disposables Division has excess capacity, and the 20,000 units can be produced without interfering with the current outside sales of 70,000 units. The total fixed cost of the Disposables Division will not change. Explain whether the Disposables Division should accept or reject the offer. Show calculations. Compute net income at normal annual production volume. Do not use a negative sign with your answers. Karakomi Cameras, Inc. Disposables Division Unit Margins Current Sales Per Unit Total Sales $Answer 11 $Answer 770,000 Variables costs Answer 5 Answer 350,000 Contribution margin Answer 6 Answer 420,000 Fixed costs: Answer 3.15 Answer 220,500 Net income $Answer 25.15 $Answer 199,500 Compute net income including the offer to purchase additional cameras. Do not use a negative sign with your answers. New Sales Proposed Sales Per Unit Total Grand Total Sales $Answer 8.15 $Answer 163,000 $Answer 933,000 Variable costs Answer 5 Answer 100,000 Answer 450,000 Contribution margin Answer 3.15 $Answer 63,000 Answer 483,000 Fixed costs: Answer 3.15 Answer 220,500 Net income $Answer 0 $Answer 262,500

Answer 1