Cayman Products manufactures and sells to wholesalers approximately 300,000 packages per year of underwater markers at $3.98 per package. Annual costs for the production and sale of this quantity are shown in the table. |
Direct materials | $ | 384,000 |
Direct labor | 96,000 | |
Overhead | 288,000 | |
Selling expenses | 120,000 | |
Administrative expenses | 80,000 | |
Total costs and expenses | $ | 968,000 |
A new wholesaler has offered to buy 50,000 packages for $3.44 each. These markers would be marketed under the wholesaler’s name and would not affect Cayman Products’ sales through its normal channels. A study of the costs of this additional business reveals the following: |
• | Direct materials costs are 100% variable. |
• |
Per unit direct labor costs for the additional units would be 50% higher than normal because their production would require overtime pay at one-and-one-half times the usual labor rate. |
• |
35% of the normal annual overhead costs are fixed at any production level from 250,000 to 400,000 units. The remaining 65% of the annual overhead cost is variable with volume. |
• | Accepting the new business would involve no additional selling expenses. |
• | Accepting the new business would increase administrative expenses by a $5,000 fixed amount. |
Required: |
Complete the three-column comparative income statement that shows the following. (Do not round intermediate calculations and round your final answers to the nearest dollar amount. Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response): |
1. | Annual operating income without the special order. |
2. | Annual operating income received from the new business only. |
3. | Combined annual operating income from normal business and the new business. |
CAYMAN PRODUCTS COMPARATIVE INCOME STATEMENTS |
|||
(1) Normal Volume |
(2) New Business |
(3) Combined |
|
(Click to select)Accounts receivableSalesPurchase discountsEquipmentAccounts payable | $ | $ | $ |
Costs and expenses | |||
(Click to select)Budgeted purchasesIndirect materialsDirect materialsCost of goods soldWages expense | |||
(Click to select)Cash discountsDirect laborDepreciation expenseSales expenseIndirect labor | |||
(Click to select)Accumulated depreciationRent expenseOverheadCost of goods soldRepairs expense | |||
(Click to select)Purchase discountsCost of goods soldRepairs expenseWages expenseSelling expense | |||
(Click to select)Cost of goods soldIndirect materialsAdministrative expenseRent expenseWages expense | |||
Total costs & expenses | |||
(Click to select)Operating incomeOperating loss | $ | $ | $ |
Get Answers For Free
Most questions answered within 1 hours.